Wal-Mart cuts generic drug prices to $4 in Florida

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Wal-Mart Stores Inc. (NYSE:WMT - news) said on Thursday it would slash prices on nearly 300 generic prescription drugs to $4 in the Tampa, Florida, area and expand the plan across Florida and other states next year.

 

The world's largest retailer, which has been hit with accusations that it provides inadequate health care for more than a million U.S. employees, said the program would be available to customers and associates of 65 Wal-Mart pharmacies in the Tampa Bay, Florida, area starting on Friday.

 

The plan will then be rolled out to the rest of Florida, home to many retirees on limited incomes, in January, and to as many states as possible next year.

 

"It's a big market where there is a need," Bill Simon, executive vice president of the Professional Services Division for Wal-Mart, said of the Tampa area, home to many senior citizens and people without health insurance.

 

Simon, speaking at a press conference held at a Wal-Mart store in Tampa, declined to say how much the program would cost, but said the company could make the changes due to its pricing and distribution strength.

 

"We're in business to make money," Simon said.

 

Shares of top drug chains were down sharply after Wal-Mart's announcement. Walgreen Co.'s (NYSE:WAG - news) shares were down 6 percent to $46.98 while CVS Corp. (NYSE:CVS - news) plunged 10 percent to $31.80, both on the New York Stock Exchange.

 

Shares of Wal-Mart, a component of the Dow Jones industrial average (^DJI - news), rose 19 cents to $49.06 in early trading but were down 44 cents, or nearly 1 percent, to $48.43 by mid-morning.

 

Wal-Mart said its program will be available to the uninsured and insurance will be accepted. Under the plan, a generic drug will cost $4 for up to a 30-day supply at commonly prescribed dosages, a small fraction of the price of most branded drugs.

 

Wal-Mart, the world's largest retailer, is already well known for slashing prices on items ranging from food to toys, putting pressure on suppliers and competitors.

 

If such a plan were to be rolled out nationally, it "could have major negative repercussions for existing and new generic pricing as it has in many of the categories in which Wal-Mart has entered," said David Maris, an analyst who covers generic companies at Banc of America Securities.

 

Wal-Mart said that the plan covers 291 generic medications used for conditions such as allergies, cholesterol, high blood pressure and diabetes. The retailer also said that some antibiotics, antidepressants, antipsychotics and prescription vitamins are also part of the plan. Not all generics in each therapeutic category are included.

 

The initiative could help jump-start Bentonville, Arkansas-based Wal-Mart's pharmacy business, revenue of which declined slightly in the most recent fiscal year. The lower priced generic drugs could help Wal-Mart beef up sales in other parts of its stores.

 

"There's a huge benefit in that people buy other things in the store when they go in to pick up their prescriptions," said Sarah Henry, a retail analyst for Sovereign Asset Management, which manages $2 billion. "Wal-Mart has picked up on that and it's not only a nice-looking thing for Wal-Mart to do, but could potentially help shopping in other parts of the store."

 

Henry noted that Walgreen and CVS can show same-store sales growth of 6 percent even when general merchandisers have sales growth of just 3 percent, indicating the pharmacy brings in repeat business.

 

Wal-Mart's move comes as several major drugs are facing, or are about to face, competition from cheaper generics, such as Merck & Co. Inc.'s (NYSE:MRK - news) cholesterol fighter Zocor, which lost patent protection in June.

 

Although generic medicines are cheaper, they are more profitable for pharmacies since the prices of branded drugs are tightly controlled by the major pharmaceutical companies that manufacture and sell them.

 

(With reporting by Robert Green in Tampa and Chelsea Emery in New York)

 

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