October 20, 2006
Wal-Mart on Drugs
Posted by Fred Tung

It's old news that Wal-Mart's low-price strategy hinges in part on its ability to wring volume discounts from suppliers.  However, the next target of this strategy may be the drug companies, which may generate some interesting debates over the Wal-Mart effect.  Wal-Mart has announced that for some 300 generic drugs, it will be selling a month's supply for $4.  While the pricing is still above cost, it's far less than prices charged by the big pharmacy chains, according to the Economist (sorry, subscription required, I think).  Target has said it will match Wal-Mart's pricing.  Walgreen's and CVS say they won't (AZ Republic).  Hard to know whom to root for in that match up.

Further on Wal-Mart and health . . .

the company is switching to high deductible health insurance for new employees beginning next year (again, according to the Economist).  The trade off, of course, is low premiums.  It's an interesting plan. Premiums as low as $11/ month, but the insured covers the first $1,000 in annual health care expenses (or $3,000 for a family).  But the insured gets 3 doctor visits and 3 prescription drugs before the deductible applies.  According to the company, the 3 doctor visits will cover most employees, who will therefore benefit from the lower premiums.  Critics argue that this just leaves sicker workers with higher health care costs.

Now, I don't know how to feel about that.  Should healthy workers be forced to subsidize less healthy workers?  More generally, is there a principled approach to risk pooling?  Can markets work it out?  My car insurer cares very much about my zip code, and while I'm otherwise demographically a very good risk, my premiums for a 10-year-old Volvo are ridiculous because I live in a big city.  Over the course of my lifetime, I will undoubtedly pay more into that pool than I take out.

In any event, the subtitle to the Economist article may only be a mild exaggeration:  "Health-care policy may now be decided in Bentonville."

Wal-Mart | Bookmark

TrackBacks (0)

TrackBack URL for this entry:

Links to weblogs that reference Wal-Mart on Drugs:

Recent Comments
Popular Threads
Search The Glom
The Glom on Twitter
Archives by Topic
Archives by Date
January 2019
Sun Mon Tue Wed Thu Fri Sat
    1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 31    
Miscellaneous Links