Wal-Mart drops drug prices, shakes up market -- again

By Jane Sarasohn-Kahn

Wal-Mart continued its first-mover tactics in health by dropping the price of prescriptions again. This time, the target is maintenance meds, which Wal-Mart will price at $10 for a 90-days supply.

This move puts Wal-Mart squarely in the pharmacy benefits management (PBM) segment vis-à-vis ExpressScripts, Medco, and the big PBM players. The three-month mail order med business is the lucrative turf of PBMs. Wal-Mart's first move into this space was in 2006 when the company priced many 30-day prescriptions at $4, shaking up the industry. I wrote about that market disruption here in January 2008.

Wal-Mart will also offer over 1,000 over-the-counter (OTC) meds for $4 and under. These will all be Wal-Mart's private labels for popular OTC brands.

As the company with the red bulls-eye did the last time Wal-Mart dropped the price of meds, Target responded as a fast follower by saying they, too, will match the Wal-Mart prices for a 90-day supply of drugs. Target's program will expand the assortment of $4 Rx drugs and the 90-day supply of these medications for $10 and private-label OTC medications for $4 or less.

While price transparency is what retail pharmacy should be all about, Consumer Reports found that prices across and even within pharmacy chains can significantly vary -- by $100 or more from the same drug, from store to store and within the chain.

Consumer Reports surveyed pharmacies' prices for three brand-name meds and one generic drug. The range of retail prices for each drug were:

• Pfizer’s urinary incontinence drug Detrol = $365 to $551
• BMS's and Sanofi-Aventis' blood clot drug Plavix = $382 to $541
• King Pharmaceuticals’ hypothyroid drug Levoxyl = $29 to $85
• Generic Fosamax for osteoporosis (alendronate) = $124 to $306.

Consumer Reports also found that independent pharmacies can be price-competitive, given these price ranges, and can offer a higher level of service -- especially access to pharmacists for personal consults.

In another prescription drug update, a study published in the American Journal of Public Health found that one in four Americans share or "borrow" prescription drugs from each other. Most common shared drugs include those for categories in allergy, pain (like Darvocet and Oxycontin), and antibiotics.

Women are twice as likely to share prescription drugs as men.

Jane's Hot Points: Almost one-third of Wal-Mart's nonprescription drugs now sell for $4 or less, luring people also shopping for groceries and clothes. The price of gas is a powerful incentive for consumers to look for one-stop shopping, and Wal-Mart can deliver on this.

That consumers respond to price incentives for prescription drug shopping is in general healthy; it's a rational economic response from the pages of Adam Smith and market theory. That people "share" drugs like OxyContin and antibiotics, however, is a rational economic response; but not sound public health. Here's an example of where market forces can drive bad health behavior.