Wal-Mart (NYSE: WMT) announced this morning that it will begin to sell 291 types of generic prescription drugs -- charging only $4 for a month's worth of prescriptions that would otherwise cost as much as $30. The news leaves me wondering why, exactly.
Wal-Mart has been assailed in recent years by consumers, the media, and activist groups for not providing adequate health coverage or high enough wages to many of its employees. The advocacy group, WakeUpWalMart.com, reports that of Wal-Mart's approximate 1.39 million U.S. employees, only 43% are covered by the company's health care plan.
So, is Wal-Mart responding directly to the longstanding criticisms of its health care policies? Are the low-cost generic drugs an answer to its employees' healthcare woes, as well as its consumers'?
Or has the retail giant simply thought of a new niche where it can leverage its enormous buying power to undercut competitors?
Judging by the reaction of investors this morning, undercutting the competition is at least part of it. In the wake of the announcement, concerns about the effect it will have on drug store chains were made clear in the market. Shares of Walgreens (NYSE: WAG), Rite Aid (NYSE: RAD), and CVS (NYSE: CVS) all plummeted with heavy trading volume.
But perhaps this is both. As Wal-Mart CEO Lee Scott said in a statement, "Competition and market forces have been absent from our healthcare system, and that has hurt working families tremendously". Perhaps this is exactly the type of good corporate citizenship critics have been hoping to see from the nation's largest employer.
Related Stories: | Topics:Management, wal-mart, Wal-Mart Stores Inc., Health and Personal Care Retailers, Retail Trade, Prescription Drugs, Health Care Issues |
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Recent Comments | 10 Total
September 21, 2006 at 8:58pm by k potter
It's about time one of the retailors step up and give the "drug stores" a reality check. They have been ripping off consumers for years, charging 5+ times the actual costs of many prescriptions because they know you need them.
September 22, 2006 at 7:53am by Reg Adkins
That is interesting. Is there a link indicating the generic medications they offer?
September 22, 2006 at 9:42am by former employee
I worked for Wal-Mart during college, during the period before and after the founder's death. I have had several relatives who work or worked there, so I'm not just theorizing. I've seen all this in person.
I'm sure he was no saint, but once Sam Walton died, Wal-Mart became a monster. In his day, he went out of his way to buy things from small U.S. manufacturers to help keep them open. He had "made in the U.S.A." plastered all over the place. We wanted employees to come on board and stay on board. He always tried to help and cater to the small-town man, because that's who he became successful with.
Then he died.
Almost immediately the "made in the U.S.A." signs and program vanished. The "saving little companies" stopped. Long-term employees were no longer the priority -- cheap ones were important. The company fights unionization now, where the employees didn't even need it before.
Last I heard, they were considering a company-wide policy of rotating shifts. Why? Well, they won't admit it, but mandatory rotating shifts will push out many of their full-time workers, which will eliminate a great deal of expense for Wal-Mart in the benefit category.
People with children can't usually work like that, especially if they're a single parent. A very large number of the day-shifters work while their kids are in school. The older full-timers will quit as well. They just don't want to work nights and weekends. Even those that don't quit will probably have to go to part-time in order to accomodate their lives.
Bottom line: Profit outweighs everything else at Wal-Mart. They'll slit your throat for a buck. I for one no longer shop there. I'd rather pay more someplace else. At least Target et al. aren't hypocrites.
September 22, 2006 at 11:57am by roger fulton
welcome to the dark side; corporate America, profits at any "cost?" I digress. Walmart may be on track to buy back, so to speak, good will, with this pharmaceutical give-away.
I smell test-market.
Tampa first, America screams for a nation-wide exposure, Walmart "bows" to the unending pleadings of sick and dying elderly eating catfood, gives in and becomes the savior of senior citizens - goes national.
Flash forward two years: the White House is now relocated at Bentonville, Arkansas.
September 22, 2006 at 4:05pm by Stan
Then he died.
Almost immediately the "made in the U.S.A." signs and program vanished. The "saving little companies" stopped. Long-term employees were no longer the priority -- cheap ones were important. The company fights unionization now, where the employees didn't even need it before.
Yikes, they started running it like a business rather than a philantrophic foundation! Certainly not a popular approach on FastCompany of course, but can you blame someone for doing what is right by shareholders, when that is the group a corporation is chartered to serve?
September 22, 2006 at 6:34pm by Michael Maier
And isn't there some irony in all this because most walmart employees do not have or can not afford health care coverage.
September 23, 2006 at 2:09pm by José Padró
Some people believe in Walmart some don't. Some listen to the story for what its worth, some just can't get over their prejudice for Walmart not even for stories like this one. God bless your health but whatever you believe about WalMart if you depend on prescriptions now or in the future you will consider WalMart for your purchase even if you vowed to never walk there again.
September 26, 2006 at 2:30pm by W.
re: "Certainly not a popular approach on FastCompany of course, but can you blame someone for doing what is right by shareholders, when that is the group a corporation is chartered to serve?"
~doing right by their shareholders? I would think they'd need to do right by their customers.. because without them, the corporation.. as well as the shareholders.. are nothing.
& re: "God bless your health but whatever you believe about WalMart if you depend on prescriptions now or in the future you will consider WalMart for your purchase even if you vowed to never walk there again."
~just because you don't stand by your own standards/morals/beliefs/what-have-you when the price is right, doesn't mean the rest of us do the same.
September 26, 2006 at 2:43pm by W-rx
re: "It's about time one of the retailors step up and give the "drug stores" a reality check. They have been ripping off consumers for years, charging 5+ times the actual costs of many prescriptions because they know you need them."
~NOT the "drug stores"... the drug companies and their distributors! I've been a pharmacy technician for nearly a decade.. and I know for a fact that the price of a prescription depends on the price that the distributor charges.. and I know.. especially in independant 'mom & pop" type pharmacies.. that though there is a formula that is normally used to figure cost, (usually its something like: dist. cost + some % = Rx cost) but when drugs like Zyprexa are needed..(one bottle of 60 20mg tablets costs a pharmacy over $1000!) ..most RPhs will drastically lower the cost for the customer.. sometimes as low as the actual pharmacy's cost.. But obviously the pharmacy cannot charge lower than the price they pay for a drug.. So your anger at Rx costs need to be directed at the drug companies and distributors.. NOT the pharmacies themselves.
September 26, 2006 at 3:10pm by W-rx
One last thing.. My last post talks about how some drugs are outrageously priced.. (like Zyprexa, just to name one of many).. Well, though some medications are priced very high like that.. some others are priced MUCH lower.. like 500 pills for $14... which is most likely what Wal-marts little catch is.. the $4 Rxs.. will probably be the drugs that are literally less than a penny a dose. (an example.. at the last oharmacy I worked for.. our insurance didnt kick in until we had our first 90 days, so to give us a hand, the RPh would sell us any of our prescription meds for the cost that the pharmacy pays.. well, one of my prescriptions was for 60 pills.. and my boss rang it up for $1. and he said even that was more than cost) So if you really want to know whats up walmart's sleeves?? My bet is they're planning on selling the super cheap drugs for $4, but probably doubling the prices on the rest... we shall see.