Ripple effects of Wal-Mart’s $4 generics

When Wal-Mart introduced $4 generics, most analysts played down the impact. After all it only affected certain products and wouldn’t matter to people with insurance. I’m happy to say that since the time of the announcement I’ve noted the potential implications (Can Wal-Mart save the American health care system?):

Wal-Mart seems to have a strategy that could fundamentally shift the market: it’s making routine items cheap enough that insurance for them isn’t even worth the hassle. Today’s announcement of $4 generics is an important step in that direction. It makes the cash price lower than the typical co-pay.

Over time the number of $4 products has increased, some competitors have matched Wal-Mart’s prices, and there’s been an increase in the awareness of just how cheap generics can be. So I was interested to see the Drug Benefits News article, entitled Generic Rx Copays Are Steady or Dropping, With Wal-Mart’s $4 Generics Seen as a Factor.

Despite ever-increasing financial pressures to shift more pharmacy costs to consumers, health plan sponsors in 2008 generally are keeping their generic drug copayments low, while lifting copays on preferred and non-preferred brand drugs, say PBMs and health plans surveyed by DBN. The next big trend, in fact, could be “zero-dollar copays” on generics, say pharmacy executives who attribute the interest in reducing members’ financial barriers in part to Wal-Mart Stores, Inc.’s $4 generics program.

So the Wal-Mart policy actually does affect insured patients after all!

Still, not everyone has caught on to the full implications. According to Tom Tran, senior director of pharmacy at Health Care Service Corporation:

“If the member feels that the medication they are taking is essential, you could raise [copays] $4, $10, and they’ll still see the benefit of taking my drug. I’d rather pay $10 a month than to have my diabetes worsen and I lose my vision and I lose my feelings in my legs and my big toe amputated,” Trans says as an example. “If they don’t see the value of why they’re taking their drugs or disease states, they’re going to see a dollar increase in copays as a burden and not take them.”

Of course Tran is right that it’s worth $10 to avoid having one’s toes amputated, but that’s not the only consideration. Another rational reaction to a co-pay increase could be, “How come I’m paying good money for pharmacy insurance but my co-pay is higher than the full price of a Wal-Mart drug, which I don’t even need insurance to purchase?”

March 21, 2008

9 thoughts on “Ripple effects of Wal-Mart’s $4 generics”

  1. A lot depends on whether you have a WalMart or matching competitor around. I live in Washington DC, and the nearest WalMart is at least 20 miles/1 hour away. I’m ahead to pay my plans $15 co-pay over spending the time/money to travel to a cheaper store. If the drug costs less than $15 they charge whatever they say it cost.

    It would be interesting to know what the average total bill of someone who goes in for a cheap prescription is. While their pricing might be making drug costs look better that doesn’t mean that consumers are ahead overall.

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  3. I hope this happens in the UK where its often cheaper to buy the drugs than at retail price than to pay for them at standard prescription prices. Walmart have quite a presence here now (they own Asda) and they could have the power to start the price drop.

  4. This is exactly what is happening to me, although I don’t use Wal Mart. My generic co-pay is $5 so Wal-Mart is actually cheaper.

    Go figure.

  5. I am all for the use of generics whenever possible. I’m not a big fan of Wal-Mart, but if this can bring down the cost of medicine for the consumers more power to them.

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  7. Patients ARE asking Wal Mart pharmacists to “turn off” their insurance as it gets too confusing as the majority of their meds are cash ($4Rx plan) and the people who pick up their Rx don’t know this, so easier to run for the $4 then keep track. So begs the question – is Medicare Part D neccessary anymore since an entire month of heart medicine is about the same as ONE gallon of gasoline.

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