May 5, 2008 / 11:15 AM / 12 years ago

Wal-Mart expanding its low-priced drug program

NEW YORK (Reuters) - Wal-Mart Stores Inc expanded its low-priced drug program, saying on Monday that it is now offering more than 1,000 over-the-counter items for $4 or less and selling some 90-day generic prescriptions for $10.

A customer leans against the pharmacy counter at a Sam's Club store in Arkansas, May 31, 2007. Wal-Mart is expanding its low-priced drug program, saying on Monday that it now offers more than 1,000 over-the-counter items for $4 or less, and it will sell certain 90-day generic prescriptions for $10. REUTERS/Jessica Rinaldi

It also increased the number of women’s medications that it offers at a discount.

“We expect that today’s extension will generate additional pharmacy volume for the company, especially given the current weak consumer environment and rising health-care costs,” wrote Uta Werner, a retail analyst with Sanford C. Bernstein & Co, in a research note.

In 2006, Wal-Mart began selling some generic drugs for $4 per monthly prescription in Florida, and it quickly extended the program to all its U.S. pharmacies.

Last year, it added more medicines to the program and said in September that $4 prescriptions accounted for nearly 40 percent of all prescriptions filled in its Wal-Mart, Sam’s Club and Neighborhood Market pharmacies.

The world’s largest retailer said pharmacies at its U.S. discount stores, Neighborhood Markets and Sam’s Club warehouse locations is now filling prescriptions for up to 350 generic medications, like diabetes drug metformin and asthma drug albuterol, for $10 for a 90-day supply.

It also expanded the number of women’s medications it offers for $9, adding drugs to treat osteoporosis, breast cancer and hormone deficiency. It is selling alendronate, the generic version of the osteoporosis drug Fosamax, for $9 for a 30-day supply or $24 for a 90-day supply.

OTC ITEMS

Its Wal-Mart Stores and Neighborhood Markets have lowered prices and will sell more than 1,000 over-the-counter items for $4 or less without a prescription — including Wal-Mart’s own Equate brand of popular medications Zantac, Pepcid and Claritin, and its Spring Valley-branded prenatal vitamins.

Deisha Galberth, a Wal-Mart spokeswoman, said Wal-Mart had already sold some of these items for $4 or below, but it has increased the number of over-the-counter items being offered at those prices.

Wal-Mart is working to expand its health and wellness services, which are seen as a way to drive shoppers into its stores more frequently and boost sales.

In addition to the discount drug program, it is opening in-store health clinics that offer basic preventive and health services, like cholesterol screenings.

“With the state of the economy in flux and health-care costs still on the rise, many families are struggling to afford their medications, to afford their access to health care,” said John Agwunobi, president of health and wellness for Wal-Mart’s U.S. stores, on a conference call.

Agwunobi said the discount drugs program is being used by shoppers both with and without health insurance. He said he “would not go into detail” on whether the program was being used more heavily by customers without insurance.

He also said Wal-Mart’s offer to fill 90-day generic prescriptions for $10 would appeal to shoppers who currently use mail-order services to fill prescriptions.

COMPETITIVE RESPONSE

Retailers have responded in various ways to Wal-Mart’s move to offer cheaper drugs. Target Corp offers some generic drugs at $4 for a 30-day supply, while Kmart, a division of Sears Holdings Corp, offers some generic drugs at $15 for a 90-day supply.

Last year, Publix Super Markets, a privately held U.S. grocer, and Meijer, a privately held retailer with stores in the U.S. Midwest, started giving away some generic antibiotics often taken for childhood ailments such as strep throat.

But Wal-Mart said it has no plans to offer drugs for free.

“We’re in business to make money,” said Bill Simon, the chief operating officer of Wal-Mart’s U.S. stores. “Free is a price that is not a long-term sustainable proposition.”

Simon said the program is not eroding Wal-Mart’s margins in its pharmacy business.

Derek Leckow, an analyst at Barrington Research, said the discount drug program has not had much impact on traditional drugstore operators, because customers are not likely to drive further to a Wal-Mart to save the money.

“The name of the game in this business is still convenience,” he said. Soaring gasoline prices are another barrier to people driving an extra mile or two to Wal-Mart to have a prescription filled, he added.

Drugstore operator Walgreen Co has a prescription savings “club” that charges $12.99 for a 3-month supply of a generic drug and also offers discounts on brand-name drugs, spokesman Michael Polzin said.

“Wal-Mart has a pharmacy, but Walgreens is a pharmacy,” Polzin said. “When it comes to health, service is at least as important as cost.”

Agwunobi said Wal-Mart is continually looking for ways to expand its low-priced drug program and cut prices on branded drugs.

“This is one more step in that journey,” Agwunobi said. “It’s not the last step; it’s just the next.”

Wal-Mart shares were down 48 cents at $57.02 in late afternoon trading.

Additional reporting by Brad Dorfman in Chicago; Editing by Brian Moss and Gerald E. McCormick

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