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Prescription for Price Cuts

Times Staff Writers

Wal-Mart Stores Inc. shook the multibillion-dollar prescription drug market Thursday with a plan to slash prices on hundreds of the most common generic drugs to $4 per prescription.

The world’s largest retailer said it would kick off its plan today at 65 Wal-Mart and Sam’s Club stores in Florida’s Tampa Bay area. The company said it expected to roll out the program to “as many states as possible by next year.”

The announcement brought praise from consumer advocates, skepticism from Wal-Mart critics, support from potential customers and a major sell-off of drugstore stocks on Wall Street, as analysts predicted price-cutting industrywide.

Wal-Mart officials did not say when the program might reach California, where it has nearly 200 stores. But residents were pleased at the prospect.

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“This should be a help,” said Lee Anderson, a 94-year-old Baldwin Hills resident sitting in a Wal-Mart waiting for his prescriptions to be filled. “With my small income, the cost of drugs is pretty high right now.”

“That’s a heck of a bargain,” said Michelle Clemons, another Baldwin Hills resident who said she might start buying her medications at Wal-Mart rather than at a local pharmacy.

Consumer advocates concerned about rising prescription drug prices were optimistic.

“We think it’s about time, and we hope other pharmacies follow suit,” said Ron Lui, a San Francisco-based senior attorney for Consumers Union, which publishes Consumer Reports magazine. “A lot of consumers don’t realize that generics are often the best option, and with Wal-Mart doing this, it might help get the word out.”

Jamie Court, president of the Foundation for Taxpayer and Consumer Rights, a nonprofit consumer advocacy organization based in Santa Monica, said, “Hopefully this will make prices more competitive for consumers.”

But he added, “It’s hard to know how the program is going to be implemented, and the devil is in the details.”

Wal-Mart listed 291 generic drugs that would be sold at $4 per prescription in the Tampa stores. The price is generally for a 30-day supply of the medicine -- or smaller quantities of drugs for short-term use.

Company officials did not estimate overall savings but cited some individual examples of drugs that would be priced at $4. A 30-day supply of Lisinopril (10 milligrams), a blood-pressure-lowering drug on the list, now retails for $11.98 at its stores. Metformin (500 milligrams), which treats high blood sugar in diabetics, retails for $7.85 for a 30-day supply.

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The company said consumers would generally save less than a dollar to several dollars per prescription, depending on the drug.

Many items on the list were for different doses of the same medicine, and the list did not include some of the most popular prescription drugs such as cholesterol-lowering statins.

Competitors were quick to point out that the plan was less sweeping than it might first appear. Walgreen Co. spokesman Michael Polzin said the 291 drugs on Wal-Mart’s list represent only a small fraction of the 1,800 or so generics available at Walgreens pharmacies.

“This has made a lot of big headlines, but in reality I don’t think it is going to have a significant impact,” he said. “We doubt this will drive individual patient behavior.”

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In addition, the $4 price tag may not be a major bargain for consumers with prescription drug discount plans who already are getting lower-priced drugs.

Generic drugs, which have the same active ingredients as brand-name medicines but cost substantially less, have gained ground in recent years.

Industry experts expect Wal-Mart’s move to accelerate the trend and bring drug prices down further as other distributors, such as pharmacy chains and mail-order companies, try to compete with the company.

“It is really going to change the industry. It is not going to happen overnight, but it will happen,” said Ed Kaplan, an analyst with Segal Co., a benefits consultant in New York. “Wal-Mart is willing to take a real low [profit] margin” and that will increase price competition, he said.

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Investors seemed to take notice Thursday. Share prices for pharmacy chains dropped across the board. CVS Corp. closed $2.96 lower, or 8.4%, at $32.46. Walgreen Co. dropped $3.67, or 7.4%, to $46.28. Wal-Mart shares fell nearly 1% to $48.46, a drop of 41 cents.

Industry observers noted that slashing prescription drug prices would probably increase traffic at Wal-Mart stores and lead to higher sales of other merchandise.

In addition, the lower prices will be available to employees of participating Wal-Mart stores, the company said. And this will help boost the company’s corporate image, said Bernard Sosnick, a stock analyst with Oppenheimer & Co. who follows Wal-Mart.

The company has been under fire from labor activists and political leaders who say Wal-Mart offers little in the way of health benefits to its employees.

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“Now Wal-Mart is helping people who can’t afford drugs buy them,” said Sosnick, who is bullish on the stock. “Does this make me more enthusiastic about how the company is changing? Absolutely.”

One of the company’s major critics, WakeUpWalmart.com, suggested that the hype surrounding the announcement overlooked the company’s weaknesses in healthcare, such as the fact that more than half of its employees are uninsured.

“Wal-Mart needs to answer one very simple but serious question -- why not just improve the healthcare coverage of its employees?” campaign director Paul Blank said in a statement released Thursday. “Sadly, this prescription drug initiative will not insure one additional Wal-Mart employee, one uninsured child or reduce the billions of cost for taxpayers.”

WakeUpWalmart.com, which is supported by the United Food and Commercial Workers union, is an organization with more than 250,000 members.

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On Thursday, Wal-Mart downplayed any business strategies.

“This is not about bringing more people into our stores,” said Bill Simon, a Wal-Mart executive vice president. “Our intent is to offer relief to our associates and customers who need that relief” from high drug prices.

Simon said Wal-Mart would expand the program incrementally as it gauged customer response. He declined to elaborate on how Wal-Mart could afford the discounts but said the company was not losing money on the venture.

High prices have driven many Americans to import less-expensive prescription drugs from Canada and other nations despite regulations against this practice. But lawmakers are considering changing these rules.

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On Thursday, House Republicans agreed to support a proposal pending in Congress that would prohibit U.S. Customs agents from seizing small quantities of prescription drugs that Americans buy in Canada and try to take home.

daniel.yi@latimes.com

alana.semuels@latimes.com

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(BEGIN TEXT OF INFOBOX)

Side effects

Wal-Mart’s move is a relief for consumers . . .

Examples of generic drug prices typically paid at Wal-Mart for a 30-day supply, which will be offered at $4 each:

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*--* Drug Illness Price Lisinopril Hypertension $11.98 Metformin Diabetes 7.85 Atenolol Hypertension 4.80

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. . . but a headache for rivals

Walgreen’s and CVS’ share prices, weekly closes and latest

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Walgreen

Thursday: $46.28

down $3.67

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CVSJ

Thursday: $32.47

down $2.96

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Source: Bloomberg News


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