Target has JUMPED on the band wagon too
http://www.azcentral.com
Following Wal-Mart's lead, Target to offer cheap generic drugs
John Dorschner
McClatchy Newspapers
Sept. 22, 2006 03:55 PM
MIAMI - Target has decided to copy Wal-Mart's plan to sell $4 generics - a move that experts say is likely to create a completely new and cheaper pricing structure for America's off-patent medicines.
"I think you're going to see very simplified pricing for generics in most places now," said Richard D. Hastings, an analyst with Bernard Sands. "You're not going to be seeing $10 here and $16 there and $20 over there" for the same generic drug - a pricing chaos that frequently exists now.
On Thursday, Wal-Mart shocked the retail industry by saying it would offer 30-day supplies of 291 generic drugs for $4 in Tampa immediately, expand to the rest of Florida on Jan. 1, and then roll it out to the rest of the nation. advertisement
Target, the No. 2 discounter, said it planned to copy the nation's No. 1, but its press release issued late Thursday evening mentioned only the Tampa area. The Minneapolis-based company didn't respond to The Miami Herald's question on Friday about whether it would match the $4 price elsewhere in Florida.
But Hastings said he believed it inevitable that not only Target but also Walgreens and CVS would follow Wal-Mart's lead nationwide. "They're capable of doing that" without hurting their bottom line, said Hastings.
However, Walgreens spokesman Michael Polzin said, "We have no plans to do a program similar to Wal-Mart's." He noted the rival's program covers only a fraction of the 2,000 generics Walgreens and others sell.
What's more, 95 percent of Walgreens customers have insurance, and for the 291 medications Wal-Mart is selling for $4, the average co-pay for $5.30 for non-seniors and $3.18 for seniors with Medicare Part D, Polzin said.
Experts believe there is plenty of room for price reductions in generics. Neil Flanzraich, former president of the Miami generic drug maker IVAX, said Friday that while generics often cost just pennies a pill to make, "it's generally been admitted that in all the pharmacy chains, the biggest profit margin they get is on generics."
"So Wal-Mart is lowering that somewhat," said Flanzraich. "That's a positive sign."
The Generic Pharmaceutical Association noted that the $4 drugs tend to be older generics, with an average of seven manufacturers making each of the cheap drugs.
Newer generics, such as simvastatin, the generic for the blockbuster cholesterol drug Zocor, go much higher - about $125 for a month's supply. Teva, the purchaser of IVAX, is one of only three companies making that tablet, and it has 180 days of exclusivity for some dosages.
WakeUpWalMart.com, an anti-company site run by a union, criticized Wal-Mart for not including generic Zocor in its bargains and noted that, while the company had boasted it was lowering prices on nearly 300 generics, the company's list showed "only 124 separate medicines," many of them in multiple doses.
Still, of the top 10 selling generics in 2005, Wal-Mart and now Target will be offering the $4 price for six of them.
In recent years. generic sales have soared, pushed by employers and large insurers concerned about drug prices increasing about 10 percent a year since 2000, according to industry data.
Generics now represent 56 percent of all prescriptions dispensed annually in the United States, but because of the huge cost of branded drugs, they account for only 13 percent of dollars spent, according to the Generic Pharmaceutical Association.
The Congressional Budget Office estimates generic drugs save consumers up to $10 billion a year.
Wal-Mart's bold moved caused investors in its competitors to drive those stocks down markedly on Thursday, but many analysts felt "that was an overreaction," Hastings said. The drugstore chains have the ability to be competitive on price, if they choose, and have the convenience of many corner locations.
On Friday, Walgreens finished up 62 cents to close at $46.90. CVS climbed 56 cents to end at $33.03 and Target was up 44 cents to $54.83. Wal-Mart, meanwhile, fell 17 cents to $48.29.
j/k