Always Low Prices — Is There Always a Catch?

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,, 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. FCS