Many analysts and news stories are rightly pointing out that yesterday’s Wal-Mart news was blown out of proportion once we all found out what Wal-Mart was really doing. In particular:
- The list includes multiple dosages of the same products, making the total closer to 130 rather than the advertised “300 drugs.”
- The list excludes blockbuster generics, such as Zocor and Zoloft
- Many of the drugs are older, low volume generic drugs that are already inexpensive
- The program is only being offered in 65 stores, with future roll-out plans uncertain
These are all valid points about the program that was actually announced (versus what the mainstream media reported).
Nevertheless, I stand by my comments from yesterday arguing that Wal-Mart's generic pricing will trigger big changes. I elaborated on these remarks with Dinah Brin of Dow Jones yesterday in her story “PBM, Drug Wholesaler Stocks Down On Wal-Mart News.”
Wal-Mart’s move, while less significant than it first appeared, represents a triggering event. The near-term impact will be determined by (a) how well Wal-Mart rolls out the program, and (b) how quickly (if ever) they include more mainstream generic products.
But the fact that this announcement dominated news and stock prices in the drug channels universe demonstrates the power of their idea. Wal-Mart clearly struck a powerful chord with people. They are signaling their intent to remove profits from the retail pharmacy industry, to the ultimate detriment of pharmacy chains and independents. I believe that we’ll look back and acknowledge September 21, 2006, as a turning point in retail pharmacy's evolution.
The inital impact really depends to what degree employer plan sponsors are actually paying for this small list of drugs. Our analysis is underway, but we expect to find that many of these drugs are 'zero balance due' to plan sponsors with the employee cost share picking up either the majority or all of the drug cost.
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