As many other people have mentioned, Walmart’s big plan is as a loss leader. They might not lose money on the actual medication, but they aren’t making back the overhead (Pharmacist time, technician time, vial, label, etc). They can afford to do this because people go shopping in the actual store in the mean time (plus they don’t have a drive thru). They probably make some money on some of the really cheap generics, but some of them are pretty expensive. I remember when Lamictal first went generic, and the generic was costing us from our wholesaler over $200, Walmart put it on its $4 list… I really hated matching that.
Don’t feel bad, you’re not the only one… Now, it probably took me closer to 20 seconds (I had to read it twice), but I was doing the exact same thing.
Rubbish. Wal*Mart’s business model is to build a phenomenally efficient supply chain and to negotiate ruthlessly with their suppliers. They thus get their costs right down allowing them to make a profit selling at a price that their competitors cannot match. Why should pharmacy be any different?
1.) It’s feel good advertising - it sounds really good when the news/media is all about the high costs of prescriptions and health care - Walmart (and I do believe they were the first) comes out and says “hey -where here to help $4 prescriptions all around”. While others are starting to do it, they are the first (and probably name wise, only) national chain that everyone thinks of for cheap prescriptions.
2.) The Majority of the things they offer for $4 a pop are already that price (or lower?, would some of them actually be cheaper without the promotion, or do they still have the $2 stuff?) They still make a profit/break even especially when volume is taken into account. Like gas, they may only ‘make’ 1-2 cents profit per gallon, but multiply that by a few hundred thousand gallons, suddenly you’re making money.
3.) As others have said, while you’re at Walmart they hope/plan you’ll pick up everything else you need - food, car batteries, tires, movies, clothes, school supplies, etc, and so on.
They take a loss on it, assuming they’ll make up the difference in the shopping you’re bound to do while you’re in the store picking up your prescription.
I believe they’ll still run it through insurance if you’ve got a prescription plan; only the copay is free in this case. At least I think that’s how it worked - I just checked the paperwork from one such scrip and it wasn’t clear.
I think the national drugstores started doing the same kind of thing within a few months, actually. And so are some supermarket chains. They’re all doing it now. But Wal-Mart is hoping people will want to buy their drugs at the same place they do a bunch of other shopping, so it’s a different idea from the drugstores and supermarkets.
It is hideously expensive. And the major problem with drug costs is the short term of the patent combined with the ridiculous amount of time wasted in getting FDA approval means that the company is protected for only about 3-4 years. And they have to recover all those costs in that time, which is why new drugs on patent cost so frickin’ much.
Using Lipitor as an example. Hit the market in 1985. Patent expiration is due in 2011. That’s 26 years by my count. Not bad for a drug that brought in over $12 billion in sales last year.
Walmart is not all that impressive. I take about a half dozen prescriptions (unfortunately) and not one of them is on that $4 list – even though some of them are generic.
‘Within a few months’ still equals them following in Walmarts footsteps - and most likely due to the realization that if they didnt, they would lose alot more to Walmart.
Face it - Walmart has ‘brand recognition’ when it comes to the 4$ prescription, and the “feel good” nature of the advertising. That counts for alot.
That’s all my quote was intended to say - Walmart did it first - gets brand/name recognition, others follow suit, but when you think of “cheap” prescriptions, you’re most likely going to think Walmart first - and that’s what Walmart wants more than anything. (well, maybe not more than the $$ themselves…)
R&D is “hideusly expensive”, but still less than marketing costs by a wide margin. Why not look at that first? Returning to the old rules about advertising prescription drugs on TV might be a start.
You know, you’re right (of course you are, you work for Walmart). I was actually mistaken about the drug, it was awhile ago. What I was actually thinking of was Terbinafine 250mg (Lamisil). I made the mistake because I was thinking about where the drug was on the shelf, and forgot that was during the period that Rite Aid made us put the generics with the brands.
Sorry for the confusion. The story stands, I just was thinking of the wrong drug.
Actually, that’s wrong, and sorta makes the point Clothahump was trying to make. Using Lipitor as your example, the patent application was made on May 30th 1986 (cite). It wasn’t approved by the FDA until December 17th 1996 (cite) So, that means it took 10 and a half years to get FDA approval. Since patents are only good for 20 years, they only have nine and a half years to sell the drug, make up the cost to bring it to market, make up the cost of the drugs that failed during clinicals, and to make a profit.
In Lipitor’s case, it has made a tidy little profit for Pfizer, but think of all the other drugs that aren’t blockbusters, and how long they might need to break even.
Walmart also does the 90 day/$10.00 for most of the $4.00 meds.
I think they do it to drive people into their store. Plus it builds loyalty. For instance, when I needed an antibiotic, it was $1.50 more at Walgreens than Walmart, not worth bothering really when you take in account I have take a bus to Walmart and I can walk to Walgreens, but I still went to Walmart to give them the business 'cause of the other cheap prescriptions.
I have found once you start getting above $20.00 in cost you can get drugs online cheaper including the delivery charge. From what I’ve used, $20.00 seems to be the tipping point in my case.
I wondered that (that marketing expenses are more than R&D by “a wide margin”) and did some research. You can certainly find other web sites making the same claim but I am not sure how they tell because none of the drug companies I investigated reported marketing expenses as a line-item total.
I looked up the annual reports of Merck, Pfizer and GSK. All reported a single number for “Selling, General and Admin”. This number was certainly larger than R&D, but would include costs of all sorts of stuff in addition to marketing, e.g. sales, legal, accounting & finance, HR, admin. The report with the most detail was GSK which reported £3,506m in R&D and £7,352m in SG&A. Of the latter, £611m was identified as legal costs and £304m restructuring, leaving £6,437m for all other sales, marketing, accounting, HR, admin and probably more. I have no doubt that sales and marketing would be the biggest elements, but have no clue as to how much each would be. I can see “sales and marketing” being significantly more than R&D, but not that marketing alone would be bigger by “a wide margin”.
