Drug costs easier to swallow

September 23, 2006|By Andrea K. Walker | Andrea K. Walker,Sun reporter

A decision by retail giants Wal-Mart and Target to lower the price of hundreds of generic drugs signals a potential turning point in how much consumers pay for medication, some experts said yesterday.

Wal-Mart announced this week that it would sell nearly 300 generic prescription drugs for as little as $4 for a month's supply.

Target Corp. responded immediately, saying it would match the lower prices.

For now, Wal-Mart is offering the discount only in its 65 stores in the Tampa, Fla., area. But with its plans to spread the program nationwide by the end of next year, some health experts predict, more competitors will be forced to follow suit.

Just as Wal-Mart and Target have pushed prices lower for items such as groceries and electronics, experts predict that the price of branded drugs with generic equivalents might also drop over the long run. Some competitors and critics charged that the move would not lower prices because the generics being offered under the plan are already inexpensive.

Also, some said that Wal-Mart was trying to bolster its embattled image as a company that does not provide adequate health care for its workers.

But many looked to the program to put new pressure on drug prices as the retail market competes for pharmacy customers.

"Wal-Mart is such a dominant player in so many markets, you're not going to be able to charge $10 in one place and $4 in another place and stay in business," said Gerard F. Anderson, a professor at the Bloomberg School of Public Health at the Johns Hopkins University. "This should drive prices down."

The price change could be a particular benefit to the nation's 46.6 million uninsured Americans. Wal-Mart said it adopted the initiative to help the disadvantaged, including poor families, retirees and those on Medicare.

Target said its decision was "consistent with its long-standing practice to be price competitive with Wal-Mart."

Wal-Mart's price strategy comes as concerns over inflated health care costs continue to stir a national debate.

Prescription drugs are one of the fastest-growing health care expenses. Americans spent $188.5 billion on prescription drugs in 2004, more than quadruple the $40.3 billion spent in 1990, according to the Henry J. Kaiser Family Foundation, a health research group.

Generic drugs make up about 56 percent of all prescription drug sales. But generics are much cheaper, making up about 13 percent of prescription drug costs. In 2004, the average price of a generic prescription drug was $28.71. The average price of a brand-name prescription drug was $95.54.

Generic drugs - often released when a branded drug's patent expires - contain the same active ingredients.

"We hope that this won't be some brief price war or some brief strategy advantage that Wal-Mart is using, but really an attempt by the big-box stores to finally lower the prices of generic drugs," said Steven Findlay, health care analyst at Consumer Union, a Washington consumer group.

Wal-Mart and Target competitors, for the most part, aren't folding under the pressure to provide lower-cost medications just yet, saying that the savings aren't as good as they seem. CVS, Rite Aid Corp. and Walgreens said they will keep their prices as they are.

The drug store companies say the $4 plans target just a sliver of the generic drug market. There are nearly 9,000 FDA-approved generic drugs.

The companies also argue that Wal-Mart and Target are reducing the price only on older generic drugs that are already inexpensive and are covered by most insurance plans.

"The average co-pay for the generics listed is just over $5," Walgreens said in a statement. "That's not enough of a difference to make most people stop using their preferred pharmacy."

Walgreens and CVS also said that seniors enrolled in Medicare Part D plans pay an average co-pay of $3 for the same medications covered under the $4 plans.

"What we offer is better access, more convenient locations and more 24-hour stores," said Mike DeAngelis, a spokesman for CVS. "They can't match the convenience factor that really drives our success."

The medicines represented are used to treat ailments such as allergies, cholesterol, high-blood pressure and diabetes. Antibiotics, antidepressants, antipsychotics and prescription vitamins are also on the list.

Wal-Mart said customers will be able to buy the generic diabetes drug metformin at 50 percent of the cost of the brand-name version of the drug and can save $100 a year buying Lisinopril, a generic blood pressure medicine.

Wal-Mart critics said the company is trying to improve its image. Labor and health advocacy groups have chided the company for its low wages and limited access to health care coverage for its employees.

They say Wal-Mart workers won't be helped by lower drug prices because they still can't afford to go to the doctor.

But many of these same critics said that Wal-Mart has the influence and size to force other retailers to offer lower prices for drugs.

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