I am positive that both Wal-Mart EVP Bill Simon (quoted above) and our own chaoticbear are accurately reporting that the selling price of those medicines is higher than the wholesale cost of the drugs alone. But I am equally positive that, if Wal-Mart’s only business was selling those generics at $4 a pop, they’d go bankrupt faster than M.C. Hammer. That price is below the profit point even for the cheapest medications, and even with Wal-Mart’s economies of scale; they make net profit from this offer only because it drives increased profits to many other parts of their business. That works because there are so many other opportunities in a business that size; if this was an effective strategy in general, more companies would be doing it. And they’re not–there are a few similar promotions, but nobody is offering as low a price on as many medicines as Wal-Mart, because nobody else has the overall business model to support it.
You’re certainly right that they wouldn’t be selling at this price if it didn’t hit their bottom line on the plus side. But that doesn’t mean that the individual transactions aren’t being made at a loss. Nobody can say for certain, of course, as those numbers are all proprietary; but given the necessary costs of doing business, I have no doubt that most if not all of these sales are not profitable in themselves for Wal-Mart. The profit comes from the increased sales on other medications and in other departments of the store driven by the increased traffic.
They don’t do that anymore…give free tchotkes to doctors. I was getting chemo last year and got a goodie bag at my doctor’s from Aventis, (I think) and the nurse said new regulations were in place that starting this year, pharm companies couldn’t give away promotional items to doctors any more.
Me, I’d like to think doctors are more concerned with which drug works best for their patient, not whether or not GSK gave them a free pen and coffee mug. Do doctors really base their prescription decisions on the latest freebie from the sexy young pharmaceutical rep?
I use Walgreens for my prescriptions and one of my generics (my thyroid medication) is actually LESS than $4/mo. Without looking it up , I think it’s about $3.45 – just over a dime per pill. Even the brand name drug is about 20 cents per pill.
So yeah, there are prescription drugs out there that really are cheap.
I’m doing a happy dance because all my prescriptions are available as generics.
The pens and coffee mugs and such are a thing of the past, yes. But the tropical island conferences are not. Some of the big items are gone, and there are new restrictions on others. For example, sales reps won’t take a doctor out to a steak lunch anymore. But they can still bring them lunch in the office if it’s not too expensive.
Not intentionally, but I believe studies have shown that it works psychologically.
I disagree. I use to buy 100 count generic Sudafed for $1. IF the R&D is fully amortized and IF the manufacturing process is cheap then some drugs can be manufactured for almost nothing. Think about it. They’re chemicals. Consider all the household cleaners and whatnot that you buy in quart containers compared to a tiny tiny pill that weighs nothing. You’re literally paying for the packaging in some cases.
Now the medicines that are made from the spleen of an albino Peruvian mosquito probably cost more to manufacture. Wal Mart isn’t selling those for $4.
They don’t mean to. But if they’re sitting there with a pen and a tissue box and a desk set and a clipboard that has “Mycoxaflopin” emblazoned on it, it’s more likely that they’re going to think of prescribing that before they think of prescribing Viagra.
I agree. Even with technological advances in supply chain and lean manufacturing combined with wholesale discounts, those costs are almost unlikely to affect the product ship and is more likely to be distributed over the cost of monthly ship an entire area/zone/whathaveyou.
What does this mean? First you are saying they are making a profit, then you say the individual transactions that led to that profit are occurring at a loss? I don’t quite understand how to resolve this.
It took me a shamefully long time (at least 30 seconds!) to get this. I was trying to break it down into what it WOULD mean if it were real and wondering why a doctor would prescribe an antifungal for erectile dysfunction…
Right. I imagine this is the bigger motivator than people doing their shopping in the store. I rarely do this kind of impulse shopping but I will get, say, $5 dollar antibiotics and $98 wart cream. I think its fair to say that the mark up on the wart cream is substantial and Walmart would rather get that than the small pharmacy next door that charges 12 dollars for antiobiotics.
This is typical loss leader behavior, not altruism or some healthcare revolution.
So Wal-Mart is using these $4 scripts as a loss leader to get you in the door and sucker you into buying their other high-priced, rip off merchandise? The Louis Vatton bags perhaps?
Did you even bother reading my post? The last time I bought prescription skin creme it cost me $120. You bet your ass that’s a tidy profit. Not exactly high fashion, but still real money. I cant remember the last time I just had one prescription to fill. Walmart draws people in with “Hey we have 4 dollar pills” but only for select off-patent generics.
I did, but I thought you were being facetious. For me, Wal-Mart has been the lowest priced of any prescription medication of any local drug store, with the possible exception of Costco by a few bucks here and there.
I remember the last time I was without prescription med coverage. It cost me $60 per month at the local pharmacy. Then Wal-Mart started its $4 program and the med was now $7 at the same pharmacy. Generic the whole time at both stores. I never bothered to price it at Wal-Mart before.
$60 to $7…who was screwing the American consumer in my situation? Big bad Wal-Mart, or the friendly local drug store?
If it were just prescriptions, then other drugstores would be able to more closely match this price point. I think it really is the whole store–prescriptions, dry goods, electronics, groceries, auto parts, etc. It’s part of a general strategy to make Wal-Mart your one-stop shop for everything you need in your entire life. That sheer variety of goods and services under one roof is one of their biggest differences from their competitors …
[conspiracy theory]Then, once they drive everybody else out of business, they can raise their prices to whatever they want, and we’ll all just have to pay them.[/conspiracy theory]
The idea is to sell at a loss to drive out the competition so you can go back and raise your prices. I am not arguing about “who is screwing the American consumber” but pointing out that this is retailing 101, not some handout from Walmart. If anything, it helps Walmart’s bottom line because people like me walk in with a script for 3 things, and only 1 has a generic.
Find out what the cash price was before the $4 program, and you’ll see who it was. Wal-Mart can afford to buy in such enormous bulk that it’ll always be the lower price. But go price-check some Terbinafine #30 one time, it’s about $100 for a month supply if you get the real cash price, but Wal-Mart offers it on the $4 list, which means everybody else has to take a $96 loss on it to match Wal-Mart.
Just because it’s generic, doesn’t mean it’s cheap. Pantoprazole (generic Protonix) has just come out, so it’s barely cheaper than the brand. Your friendly local drug store wasn’t screwing you, they just couldn’t afford to take the hit on the price like Wal-Mart can afford to. That’s been Wal-Mart’s business model since it began, why should pharmacy be any different?
