Is The "Wal-Mart Effect" Slowing Drug Inflation?

The inflation rate for prescription drugs—currently at 1 percent for the past 12 months—is at its lowest ever recorded in the past three decades, and some are speculating that Wal-Mart’s popular $4 generic drugs program is helping drive the costs down across the market.

It’s the only area of health care that hasn’t risen sharply, says the New York Times, and it’s at least in part because more consumers are turning to generic drugs, and because new generic versions of popular drugs are coming out. But there’s also speculation that Wal-Mart’s $4 generic drug program, which it launched last year, has helped. For one thing, it’s prompted competitors like Target and Kmart to offer or expand their own discount programs. But it may have also helped drive market prices down. One Labor Department economist said he noticed a dramatic drop in generic drug prices after the $4 plan was launched.

Earlier this month, Wal-Mart announced that they’d offer their employees 2,400 $4 generic drugs, over 2,000 more than what they sell to the public. The Labor Department economist says the drop could be a one-time phenomenon unless the big discounters expand the number of drugs they offer. Nobody knows whether or not that will happen, but Wal-Mart has said that later this month “it may make an announcement regarding its generic drug program for consumers.” In the meantime, look at our earlier post on how to find the cheapest drugs.

“Helped by Generics, Inflation of Drug Costs Slows” [New York Times]
(Photo: Getty)

Comments

Edit Your Comment

  1. dextrone says:

    Disaster is to come, cheap things=cheap standards, I hope nothing degrades in standards of medicine, especially with the FDA and all, who knows.

    Anyone else having this speculation?

  2. Sudonum says:

    OK, First off, I am not a WalMart fan. But the wife, she’d do business with the devil if it meant saving a buck.

    She moved two prescriptions that insurance isn’t paying for from Walgreens to WalMart and is saving $40 a month.

  3. Hambriq says:

    I’m not buying it.

    Do you know who makes all the money off generic drug sales? It’s not the drug companies, it’s the retail pharmacies. Here’s a tip about pharmacies; we all have a minimum price that we charge for prescription drugs. It doesn’t matter how cheap the drug is. The drug could cost less than a penny, and we would still charge that minimum fee. At my pharmacy, that fee is $10.99. At most pharmacies, the fee is comparable as well.

    We do this for two reasons. One, it’s illegal for an insurance company to charge you more than the store price for a prescription drug. Most insurance companies have a $10 copay for generics. So, when you get your 30 hydrocholorthiazide or atenolols, the insurance company can charge you $10.00, even though the actual price of the drug is closer to $2.00. This is because the pharmacy would charge you $10.99, so the insurance company gets away with charging you “less” that what we would charge you.

    Secondly, it’s done to recoup losses in other areas, like theft, loss, damages, and non-reimbursement. Our friendly way of passing the charges on to you.

    So this has two implications. One, most of those $4.00 generics are drugs that actually cost less than $4.00 for a thirty day supply. Two, there’s a crafty way to get around the price increase.

    First things first: make sure your drug is actually cheap. If you’re getting ANYTHING that’s a brand name, it’s not cheap. Most anti-depressants aren’t cheap. A few that are: Generic Xanax, Ativan, and Valium (alprazolam, lorazepam, diazepam). Generic Vicodin. Lower strength lisinopril (and anything that ends with -pril, for the most part.) Hydrochlorothiazide. Levothyroxine. Atenolol.

    Then, tell your doctor to write your prescription for 90 or 100 pills at a time, rather than 30. Then, tell your pharmacy that you don’t want to file the drug on your insurance. We’ll give you the cash price of the drug, and because you’re getting so many, you probably won’t end up paying the minimum charge. 120 hydrochlorothiazide costs 12.04. 30 costs 10.99, which translates out to a 10.00 copay on mosts insurances.

    The best part is, there’s nothing illegal about this. You’re not committing fraud or being even the slightest bit immoral. You’re just beating the system.

  4. Hambriq says:

    @dextrone: “Disaster is to come, cheap things=cheap standards, I hope nothing degrades in standards of medicine, especially with the FDA and all, who knows.

    Anyone else having this speculation? “

    Not at all. As I indicated in my previous post, the drug companies aren’t losing any money when people get their $4.00 generics. It’s the retail pharmacies who lose the dough, and we’re not the one’s making the medicine, so there’s nothing to worry about.

    It’s basically just the Wal-Mart effect. They pay the drug companies the same price that other pharmacies pay them. They just lessen the amount of markup (sometimes even to the point where the drugs are a loss leader.) That brings people into Wal-Mart where hopefully they will spend more money on Wal-Mart’s wares than Wal-Mart loses by cutting their prices.

    The drug companies still get paid either way, so you don’t have to worry about any kind of lessening quality.

  5. ElizabethD says:

    Does this mean we have to say something nice about Wal-Mart?

  6. Jeff_McAwesome says:

    Disaster is to come, cheap things=cheap standards

    That is just what the drug companies want you to believe. The cheap drugs do exactly the same thing as the name brand drugs, and cost orders of magnitude less. The drug companies over-charge Americans because they can’t get any money out of the Socialized health care systems. I say good for Wal*Mart.

  7. wwwhitney says:

    Hambriq… let me get this straight. Walmart is doing something bad because they aren’t trying to gouge people who don’t have insurance to buy drugs with? How can anyone argue that Walmart offering drugs at affordable prices is a bad thing for anyone? Yes, it hurts the bottom line of competing pharmacies but am I really supposed to care? No, I want affordable drugs with prices that aren’t artificially jacked up by the pharmacy I buy them from. If traditional pharmacies can’t compete with this business model, they need evolve or die.

  8. amoeba says:

    Today I got a prescription from my doctor to control my Hay Fever. I was “shopping” around the pharmacies around my area, and I ended up buying them at Wal-Mart. I bought them there because they have the lowest price. I don’t shop at Wal-Mart, but I found a great deal with the price prescription. I don’t give a crap with the over-priced generic pills at my local SMITH’S

  9. d0x says:

    This is good news, the cheaper the better if you ask me as just getting a script costs me $40 for an office visit…

    There is insane markup on the drugs so Walmart might as well charge somewhat closer to cost and drive sales around the pharmacy area, or around the store.

  10. lestat730 says:

    Damn, people getting a months worth of medicine for 4 dollars sounds like heaven to me *curses the $5 per pill prescription I NEED to take daily that has no generic version yet* and that’s WITH insurance…

  11. Extended-Warranty says:

    Even though I currently don’t take any medicine or know too many who do, THANK GOD for this. The higher ups in the medical industry are making sick amounts of money while many suffer whether it’s through being sick and not being able to pay for it, or being poor and can’t afford health insurance/get it through work. Now if people would start going to other countries for their surgeries, maybe we can finally start to drive DOWN the costs of medical care.

    Finally Wal-Mart screws someone who deserves it.

  12. Bay State Darren says:

    Wal-mart…good? Um, I’m just, confused. I think I just saw a flock of pigs buzz my 3rd story window. [Although it was a pleasantly warm day here, so it’s good to know I’m not actually in Hell.]

  13. bohemian says:

    We have insurance but we use Target’s $4 program for as many prescriptions as possible. When I was having health problems I carried a printed copy of my insurance drug formulary and a copy of Target’s $4 script list. My first question to the doctor would be if there was a generic that would do as good of a job and then look it up on the Target list. If it wasn’t I would see what was on our formulary.

    I really hope Walmart does add those 2000 extra drugs to the $4 list. It could create a drastic change in drug costs.

    If people really want to drive down drug costs they need to push for more drugs to go generic.

  14. dextrone says:

    @Jeff_McAwesome: Well, I know that (on a different note:those BIG pharmaceutical companies are evil[exaggerated, but I still know doctors and they tell me that they try to win some doctors over {discounted vacations/CME courses} but it never works] they do charge alot), but the thing is that there is always a catch, even if it does not occur in this year or the next, it could even be decades until it occurs or may never occur (that would be the lower standards).

    How I wanted to put it: If others follow this they may pressure companies to make cheaper medicine, that may create weaker medicine. However, there may be consequences beyond this which may not even include my original consequence. For example, Walmart may try to hire less experienced pharmacists (hopefully this will not happen, and they will at least have decency when dealing with medicine) or may hire less qualified (less or no internship, etc.) pharmacists who will accept lower wages (disclaimer, I’m not sure of any regulation of these things) , etc.

    But whatever HAMBRIQ said does make sense.

  15. CoffeeAddict says:

    Although I do not go to the Wal-Mart pharmacy very often they genrally very good. I find the staff very helpful and they know what they are talking about. If they are keeping the prices of drugs down that is good.

  16. synergy says:

    What about importing from Canada? :D

  17. synergy says:

    A lot or allot. There is no alot.

  18. Hobo-NC says:

    Wal-Mart is great, despite what the liberals who run and frequent this site believe. I see no reason to buy the same product for more money somewhere else.

  19. @Hambriq: “One, it’s illegal for an insurance company to charge you more than the store price for a prescription drug. … Most insurance companies have a $10 copay for generics. So, when you get your 30 hydrocholorthiazide or atenolols, the insurance company can charge you $10.00, even though the actual price of the drug is closer to $2.00. This is because the pharmacy would charge you $10.99, so the insurance company gets away with charging you “less” that what we would charge you.”

    I’m not sure I understand this. My insurance company doesn’t “charge” me for drugs; they kick in when a drug is over a certain amount depending on the tier in the formulary I’m on. When my drugs cost under $15 (which I think is my lowest possible co-pay but I’m not sure I’ve ever been prescribed anything at that; I usually pay $25 or $45), I just pay for the drugs and the insurance company isn’t involved.

    The last antibiotic Rx I filled cost me $4.36. At Walgreens, not a place with the $4 generics programs. (And somewhat before $4 generics hit the news.) Why would my pharmacy set an artificial bottom that’s in any way related to my insurance co-pays? And since my pharmacy serves patrons with a wide variety of insurers who set a wide variety of co-pay levels, as well as patrons who pay cash, HOW could they possibly do this, since they’re required to make available all the drug prices? (And they’re printed on my package as “total retail – your insurer saved you – you pay.”)

    I mean, even my husband’s company, through whom we get health insurance, offers four different plans with one insurer with four different sets of drug co-pays. I don’t understand how pharmacies can play this pricing game with that many sets of co-pays in play.

  20. goodguy812 says:

    my dad can’t afford his meds any other way. either go to wal mart or die. rock on wal-mart!

  21. Hambriq says:

    @wwwhitney: Hambriq… let me get this straight. Walmart is doing something bad because they aren’t trying to gouge people who don’t have insurance to buy drugs with? How can anyone argue that Walmart offering drugs at affordable prices is a bad thing for anyone?

    You can’t. Which is exactly why I wasn’t saying that, or anything even close to that. Idiot.

    =============================

    @Extended-Warranty:

    Even though I currently don’t take any medicine or know too many who do, THANK GOD for this. The higher ups in the medical industry are making sick amounts of money while many suffer… blah blah blah

    Finally Wal-Mart screws someone who deserves it.

    Your grasp of the system is woefully lacking. And ignorant, I might add. Wal-Mart dropping the prices on their generics is just a pricing game, a loss leader designed to get people into the store. Sure, it’s great for us as consumers, (as some of those drugs they offer for $4.00 actually cost substantially more than that). But to stand by the notion that somehow, this is putting the screws on Big Pharma? What a joke. Like I said earlier, Big Pharma isn’t making ANY money off of generic drugs. Retail pharmacies are. The only people Wal-Mart is “screwing” are the other retail pharmacies out there.

    =============================

    @Eyebrows McGee:

    I wasn’t meaning to imply that the retail pharmacies are in on the game with the insurance companies. Applying a minimum charge for prescription drugs is simply a way for us to squeeze money out of people. A lot of insurance companies take advantage of this in the ways I described in my original post.

    Not all of the insurance companies do, and apparently, yours is one of the good ones. But believe me, I see my fair share of people getting screwed against the wall. But your point is certainly valid, as there are far too many insurance policies out there for us to design the minimum price with insurance companies in mind. Again, it’s just a pricing game on our behalf to get more money out of people. For a lot of the less upstanding insurance companies out there, it’s just a crime of opportunity.

  22. @Hambriq: Thanks, I guess I get it. Although I think my insurance company is screwing me because they hardly pay for any Rx drugs and my pharmacy are the good guys. :) (They don’t seem to have a minimum Rx charge, as I’ve had generic Rxes as low as about $2.50.) But then, I know what the markups are on some of the other Rx drugs (like antidepressants) so I guess they aren’t THAT good of guys!