Even the Goliath of retailers, Walmart, can cut prices too far sometimes in the attempt to lure new customers in their stores. It seems that the large retailer is finally feeling the ill effects of their five year old $4 generic drugs promotion. I’ll explain why I think this below with a new study to prove my point.
I came across this article from Reuters last night while doing some research for potential blog topics. Apparently there was a study done by a doctor from New York that looked at the prices of some brand name diabetes medications. Dr. Ronald Tamler looked at the increases in price for some common brand name diabetes medications over a two year period (2008-2010) and found that some retailers like K-Mart and Walmart had raised their prices proportionally higher than other pharmacies.
So while the net effect of the $4 generic revolution by Walmart starting in 2006 caused generic medications to drop in average price there was also a noticable increase in the price of brand named medications during this same time period. The price difference between brand and generic drugs increased as average generic prices fell by over half while brand name medications more than doubled during the same period.
And those price increases might not be fully explained by increases in drug cost either. While the average increase in price for certain brand name drugs according to this study went up some 21% at pharmacies including chain drugstores Walmart increased their prices by 32% and Kmart raised theirs by 35% during the same time period. It seems that the old advice for patients to shop around for the best deal for prescription drugs has never been more true than it is right now in the aftermath of this study that puts some hard numbers to the price increases of brand name prescriptions over the two year study period.
But what do all these numbers really mean for community pharmacies and for Walmart specifically? I think this is the first clear sign that Walmart’s $4 generic experiment is finally catching up with them. Even if you dismiss this pricing structure as a “loss leader” tactic by Walmart there must still be some questions about the long term sustainability of a promotional program such as the $4 generic prescriptions list.
Walmart advertised the plan as demonstration that they were leading the way to more affordable healthcare by pricing generics so low that more people could afford care. Many consumer advocacy groups praised the retailer for addressing a major healthcare issue: prescription drug prices. But the long term effects of that promotion can already be seen in the form of staffing cuts almost across the board among the community pharmacies that tried to compete with Walmart on price. And while the under insured or the uninsured may be grateful for such prescription bargains at what price are those rock bottom prices really achieved?
And if Walmart offsets their bottom of the barrel generic drug prices with higher brand name drug prices how much does the average consumer really save during a typical trip to their local pharmacy? Those numbers now are in question thanks to this study by Dr. Tamler. And if they are raising other prices to make up the difference in revenue lost from their $4 list are patients really getting the best deal at their local Walmart pharmacy?
I think it is a shame that retail pharmacy has been reduced to simply selling a commodity as if we were a specialty coffee shop or an ice cream parlor. The $4 generic list did nothing but devalue the profession and undercut the price of generics at competitors of Walmart. And by following suit all the other chains fell for the Walmart trap. Thus resulting in an unsustainable pricing structure that is now starting to really affect the bottom line at the average pharmacy.
I’d like to see a study that shows the average staffing hours at a retail pharmacy since the implementation of their $4 generic list. Or how about the average wait time for a prescription after companies cut staff to make up for revenue that wasn’t coming in anymore because “Walmart does it” and for some reason we all had to follow suit? Better yet, how about an honest count of the significant prescription errors and pharmaceutical misadventures since this pricing war started in America? I’d love to review a study with those numbers.
It is time we all faced a hard fact. It is time we all admit that we can’t simply give away drugs and survive long term. This “loss leader” concept might work for clothing or food or hardware or electronics but using a business model like this for something that impacts public health can be downright reckless and dangerous. When quality of care decreases to a point that same day pharmacy service isn’t possible or when pharmacists are so over worked they start committing more errors is this really worth getting that HCTZ for $4?
And if a company is simply raising the price of other medications to offset the “value menu” of community pharmacy is the average patient really saving that much money by shopping at a pharmacy like Walmart? Certainly a study like this one gives some numbers that might put a patient’s potential savings in question.
I’m not saying that saving patients money and making medications more affordable for more patients is a bad thing. But at some point the potential dangers offset any gains you might realize by lowering the price of drugs to attract pharmacy customers. It is like making cars increasingly fuel efficient and then finding out they are also increasingly dangerous due to lower net curb weights.
We must not sacrifice patient care or safety simply to chase a bargain. Prescription medications are a major expense and a large component of the healthcare expenditures but at some point a reasonable selling price must be maintained simply to prevent the distribution system we now have from breaking down. And matching a company that thinks pharmacy is nothing but a “loss leader” devalues what we due to the point of creating the mindset that pharmacists are glorified counters.
We can’t keep doing the “loss leader” game simply because Walmart is willing to give drugs away to get people to shop at their stores. It is time to get a reasonable price for the goods and services we provide at the pharmacy. We can’t continue to lose money on each $4 generic prescription we sell. It isn’t financially feasible and it will lead to more staffing cuts, longer lines and waits, and potentially more prescription errors going forward. All of those negative trends are doomed to continue as long as we keep prices at unsustainable levels.
So Walmart I have a little message for you. I can’t help but say I told you so. I knew it was only a matter of time before this ill conceived promotion would catch up with you. And if you charge more for some brand name medications to offset this “loss leader” strategy are you really saving patients money in the end anyway? I think it is time for “Operation Devalue Pharmacy” to come to an end. I’ll give you one thing. It was a good run while it lasted.
The Redheaded Pharmacist