Wal-Mart's drug program

If lower prices are all that matters, nothing is wrong with this. If being human is more than just being conduits for higher or lower priced commodities, there might be a problem. People have become so conditioned to the dependence of life within the cash nexus that they cannot easily imagine goods acheivable outside of it.>

The Wal-mart drug thing shows the way in which their situation defies a simple dualistic (good vs evil, big box versus mom-n-pop) world view.

How's that?

1. What about those mom-and-pop pharmacies that lack the buying power to buy so many drugs that they can sell them for $4 for a month's supply and not lose money? This can't be monopsony market (with Wal-mart as the sole buyer), because there are a myriad of pharmacies, big and small, in the market. So would we willingly pay more, often MUCH more, to the mom-and-pop store so that they can stay in business? What if the patients can't afford mom-n-pop prices, but can afford $4?

2. What about those evil drug companies? The availability of $4 generics puts some real hurt on their name brand equivalents. Will Big Pharma continue producing those name brands? Is this good or bad? Does the fatter profit margin on, say, name-brand amoxicillin line the pockets of executives, or does it enable more drug research? The producers of generic drugs do not perform significant amounts of basic drug research.

3. What about lower-income Americans? Would we rather have cheaper drugs that they can pay out of (possibly uninsured) pockets, or would we rather have more legal requirements for giving them health insurance with drug coverage? Which option really works for their, and the nation's, best interests long-term?

4. The opponents of Big Pharma have long carped about the high cost of drugs. This unilateral move by Wal-mart gives, at least with regard to generics, most everything these opponents want (namely, low retail prices on medication), except that it was done without legislation and was done by the king of Big Retail. This must leave some people mightily conflicted, especially if other corporate pharmacies (e.g., CVS, Rite-Aid, etc.) lower prices to compete, pushing this price point further in the marketplace. Target has already announced they plan to follow suit.>

I'm with Lucius. Wal-Mart basically admitted they're squeezing the drug companies dry to do this, although not in so many words.

In an AP article on Sept 21, Wal-Mart said:


"We're able to do this by using one of our greatest strengths as a company our business model and our ability to drive costs out of the system, and the model that passes those costs savings to our customers," he said. "In this case were applying that business model to health care."


"Drive costs out of the system?" Oh really? And who are they pinching in order to make that possible?


And this...

"He said Wal-Mart is working with drugmakers to help them be more efficient, but added, 'We are working with them as partners. We are not pressuring them to reduce prices.'"

No pressure? I'd like to see how that's even possible given WalMart's buying power. WalMart doesn't have to use pressure, they just have to say, "You will jump through this hoop." And guess what, the supplier jumps through the hoop because they have no choice. They're too dependent on the revenue they get from WalMart's sales.


Anyhow, I used to kinda think, "Wow, whatever WalMart's doing to lower prices is good. It's making the world a more efficient place, and passing the savings on to us." And while that might have been the case a decade ago, now they're so gigantic that it's just not true. WalMart, along with many other giant conglomerate corporations, is dictating practically every aspect of my consumer life. They get to choose what clothes I get to wear, what food I get to eat, what toothpaste I get to use. They're so big that they're limiting our freedoms, most notably our ability to act as free agents in the give and take world of capitalist economics.>

Disclosure: I have major objections to Wal-Mart on a number of issues, so please have your grains of salt handy.

The super-store situation is new in capitalism, not because of the model (department stores come to mind), but because of the extended reach and impact these store have.

For example, many corporations (mine included) have "value-added" commodities or services, that by themselves are at best break-even, but have an indirect and positive impact on the profit centers in the business.

Wal-Mart is no excpetion to this. The objections come in when they make their choices as to which products are expected to be profit-centers, and which ones value-added.

Play a speculation game with me: with the financial clout that a Wal-Mart has, what's to stop it from making a discount pharmacy a value-added service? With prices cut so low that they hardly make any profit, the clearly expected result is a severe shrinkage in the customer base for every other pharmacy. In the meantime, Wal-Mart has enhanced its sales in many other areas, because most people will take advantage of the convenience and do as much of the rest of their shopping there as WM has the products they need or want.

But, still, mom-n-pop and corporate pharmacies alike will lose business. Cutting their prices to match or compete won't be enough, because no matter how low WM goes, the rest of them must maintain a profit margin.

Let me remind you, I'm hypotheticating here for the sake of discussion. While I wouldn't say WM is planning to do any of that, I also wouldn't say that they won't do it.>

Since it appears as if everyone wants everything for nothing I say we nationalize the Entertainment Industry (ie books, music, tv, film, game-boys, yoga classses, newspapers etc, etc) so that individuals can use their money to purchase their own health care according to their individual needs.

Hey,man everyone knows that life without art means death so it is our human right to be entertained instead of giving money over to evil artist profiteers who exploit our need for art and all things entertaining just so that the evil artist profiteers can have their limos, private jets, mansions by the sea, personal assistants, personal trainers, million$$$ wardrobes and billion$$$botox plans. Plus money left over to act as compassionate and caring political activists aggitating their cause against Wal-mart.>

There's another problem:

If drugs are cheap, people will be healthier. If people are healthier, there will be more people going to Mass who normally would be kept home by mild illness. Those people are not as spiritually engaged as the Crunchies. Therefore, the Crunchies will have to endure larger numbers of less-engaged Massgoers, which will ruin the spiritual experience for them.

Many prescription drugs cannot or should not be mixed with alcohol. If more people have access to these drugs, they will not be able to drink wine with their friends from the organic gardening/homeschooling co-op in their bungalows, thus dooming the Crunchy lifestyle.

This is a bad idea on so many levels.>

I agree with the posts by Kristen M. and Franklin Evans.

The downside is that Walmart's predatory nature. As they have done with other market areas, they will offer lower prices to drive the competition out of business and then you will basically have one the one stop shop for all your pharmaceutical and other needs.

You also won't have to worry about your local self-employed pharmacist. He will now be found at the big happy face on the outskirts of town working for a somewhat lower income.>

"Wal-Mart basically admitted they're squeezing the drug companies dry to do this."

Trial lawyers will get jealous!>

'Wal-Mart will treat the generic drug makers just as it treats the pickle makers: "Give us your drugs at this price, or you're outta here."'

Welcome to capitalism, Lucius. Customers beat up vendors on price in every business. It is key to maximizing efficiencies in the market.>

Franklin

You are probably right about both the value-added nature of this new venture, and that it will hurt smaller pharmacies. However, I don t think this is necessarily bad thing.

I am all for locally owned, and in general, smaller more specialized businesses of all types. They provide services and selections that large retailers never will, with more overall-shopping expedience. Some things that come to mind are vintage or used clothing and goods, wine, fresh fish, CDs, books, and so on. In fact I almost never go to Wal-Mart. Small businesses also add a cultural aspect that large national retailers just can t provide. However, small businesses that survive do so because of ingenuity and market relevance, not just for the sake of being small or mom and pop.

Although I don t know exactly what smaller drug retailers can do that Wal-Mart can t, outside of completely re-inventing themselves as another type of business, small business ownership will find a way to survive. It always has. Remember things such as bakeries, and fishmongers still exist, even though the supermarket came along. Of course as always, I could be wrong.>

Rather than weigh in with my own opinions, I'd like to share the story of the manufacturer that said "no" to Walmart.

I'd also like to share Michael Pollan's latest letter to Whole Foods CEO John Mackey in which he addresses precisely these issues. The most relevant part:

Much of your letter dealt with the issue of scale, and you rightly point out that in my book I sometimes left the impression "big" was necessarily bad, "local" necessarily good, and "industrial" generally evil. I take your point. Though I do think I did try to complicate that prejudice--and it does need to be complicated--in my treatment of Earthbound Farms. Today, I think the most important scale issue is not that "big is bad" but, since big is here to stay, exactly how such entities can engage with small and local ones--indeed, I think this is one of the most momentous questions that confront us, both economically and socially. If Whole Foods' renewed commitment to supporting local agriculture succeeds--that is, if it proves profitable for all concerned and endures--you will have achieved something much larger than helping a handful of small farmers. Rather, you will have disproved the widespread assumption that big corporations can only deal profitably with other big corporations, and in the process can't help but crush small and local producers and economies.

This is a crucially important issue. Many people (myself included) have taken it as an article of faith that the only relationship companies like Wal-Mart or Sysco can have with small suppliers--or small towns--is extractive and destructive. Much the same is assumed to be true of the globalized economy--that by its nature it will homogenize all forms of local diversity and damage local economies and the communities that depend on them. This certainly has been the historical trend--witness Wal-Mart's impact on downtowns and small food producers. Transaction costs have made it difficult for big companies to deal with small firms, and a food economy based on cheap commodities drives all players to get as big as possible, forcing them to depend on volume and cost-cutting to make up for shrinking margins.

Much depends on whether that commodity logic can be successfully challenged--the survival of not just local farms, but local flavors, economies and biodiversity hangs in the balance. There is some reason to hope that technology--computer technology in particular--may make it possible for big companies to do business with small artisanal firms at a profit to both. I'm told that Sysco is working to develop such a model, experimenting with a computer interface that would allow a chef anywhere in the country to order, say, a single wheel of cheese from a small dairy in Vermont, and have it delivered as part of their Sysco order in a couple of days. Slow Food has proposed a new model of global trade, that they call "virtuous globalization"--using the power of international markets to actually promote local flavors and products. So a producer of an heirloom bread wheat in Piedmont who can't charge a sufficient premium in his local market could contract with William-Sonoma to sell his flour here; customers halfway around the world wind up preserving a cultivar the local market couldn't. This is what I gather you have in mind when you write about the ethical importance of trade. But it's important to distinguish between kinds of trade, and in each case look both at who benefits from it and whether it promotes local communities and values or undermines them.

Downside? Perhaps one is that, if they aren't there already, the generic maufacturers will have to move to Chinese factories.

Slightly off the topic, but still about WM: there are 6 members of the Walton family on the Forbes 400 with a total estimated value of $79.9 BILLION. At what point will they have enough to offer a living wage and decent insurance to their employees?>

Matt: "Welcome to capitalism, Lucius. Customers beat up vendors on price in every business. It is key to maximizing efficiencies in the market."

Despite your rude flippancy and intimations that capitalism is lost on me, my post was entirely congruent with the understanding of capitalism. It is surprising that you could have missed it.

The whole point is that "maximizing efficiencies in the market" may eliminate the generics market entirely, an odd outcome for a policy with a genesis of "helping the poor."

By the way, is there some reason for the overabundance of ill-tempered, poor-mannered commenters on this thread? It is reminiscent of a junior high gabfest where the highest frequency of insults and rudeness is a sign of achievement.

Is there some attraction to stand victorious on the typewriter of battle, covered with verbal blood as the "Eric the Red of Comboxes"?>

Good point, Dovid. I got really excited when I saw the title of this thread. I thought maybe Walmart was getting more of it's employees off of Medicaid.

I don't know how things work for the insurance agencies. I know that I pay $10/prescription whether I get a generic that would cost $2 or a brand costing $80. I'm thinking that this might hit insurance companies hard because they wouldn't be making money off of generics if you can buy them at Walmart. I think that it's possible that drug co-pays could go up for the more expensive drugs because we know that the insurance companies will pass the loss onto the consumers.

As for big pharma, they take a hit as soon as the drugs go generic. Every drug in the same category takes a hit as soon as one of them goes generic. I don't know that it will impact them much. They're making money off of the patent drugs. Many of them sell the drug as soon as it goes off patent.>

WalMart, along with many other giant conglomerate corporations, is dictating practically every aspect of my consumer life. They get to choose what clothes I get to wear, what food I get to eat, what toothpaste I get to use. They're so big that they're limiting our freedoms, most notably our ability to act as free agents in the give and take world of capitalist economics.

Please tell me that this is a joke. There isn't a big company out there that tells me what clothes to wear or what toothpaste to use--and Wal Mart isn't limiting my freedom. When I want clothes, I shop at a variety of places for a variety of reasons--and only if I were looking for something truly cheap would I look at Wal Mart. When I shop for toothpaste, I pay the outrageous prices at Whole Foods because they carry the weird stuff that I like.

My little feet can always carry me to another store if I don't like the opportunities offered on the Wal Mart shelves.

Local isn't always better, bigger isn't always bad, and manufacturing, distribution, and business efficiencies are some of the reasons that we in America right now enjoy a better standard of life than the grand majority of people who have ever existed on this planet. The ridiculous number of choices that we have as consumers are not dictated by Wal Mart unless we shop exclusively within the confines of that particular big box.

My insurance coverage doesn't include drug benefits (I work for a small company), so the fact that Wal Mart might make it easier for me to afford a generic brand when I get sick isn't hurting my feelings at all. Like most other innovations in my life--whether they are technological or based in business efficiencies--this will simply make my life a little bit easier.

Hooray Wal Mart! And, of course, Hooray Beer! Actually, mostly hooray beer since I don't have any prescriptions to fill any time soon...>

Wailing on other people's livlihood's isn't conservatism, it's contempt.>

John T,

Thanks for your voice of civility. The sizable minority of belligerence and hostility in the comboxes on this site makes me wonder at my own wisdom in stopping by, and also at Rod's willingness to subject himself to such needless abuse.
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1) Depends on purity. That means contaminants with alternative forms (isomers) of the active drug and other by-products of synthesis. I have no personal knowledge of the comparison of generic vs. brand name purity of drugs. If sufficient purity is achieved, it doesn't matter if the drug is synthesized by a big pharma company or isolated as a natural product from swine manure - they are exactly the same compound.
2) I believe as a matter of definition "no".
3) The commoditization of drugs and health care is a dangerous trend. Health is a very important matter to all, and most would be willing to pay much for it. One would think that people would be willing to pay more for health than for housing or food. Commodity products, as you stated, are based upon cost and efficiency. It reminds me of an advertisement I once heard: "If you had the opportunity to run into an optometrist office for a glasses perscription, would you be happy if they could pump out your glasses in 90 seconds?" Most of us want some quality built into certain items that we purchase - drugs, vaccines, OTC items would number among them for me, and I am willing to pay for it.>

rod, don't be misled. K the C isn't me. neither is katieoconnor. but they sound like darn good company!>

On drug quality, brandname vs. generic:

Evidence that generic drugs are no different from brandname drugs.

MedicineNet.com

FAQ-format article at WebMD.com

FDA Center for Drug Evaluation and Research

All three lay out the evidence for generic drugs being identical to brandname drugs in all but a limited list of cosmetic differences.

Anyone claiming otherwise, please provide citations of similar authority and credibility. Spreading rumors is not a good way to win an argument, eh? ;)>

I was not spreading rumors. I was asking for confirmation. The drug reps were telling me that the generics are not as good. It was anecdotal. Once they are off patent, I don't see how quality could be impacted.>

watsy,

Thanks for the link (
http://www.afa.net/Petitions/Iss...tail.asp? id=217
). I used it to let Walmart know how much I appreciate their support for diversity and their willingness to take a stand against discrimination!>

Late to the discussion--but Franklin (11:53 a.m.), when you say "value added" do you actually mean "loss leader"? I.e., they are willing to lose money on some products (generic drugs) in order to get people into their stores to buy other stuff.>

Let me get this straight......

When a corporation charges people "too much," they are guilty of "price gouging."

When a corporation charges less, they are guilty of "undercutting Mom and Pop competitors."

So, tell me the difference between a Crunchy Con and a Naderite Socialist.>

Connie,

I'm less familiar with the term "loss leader", but your description is clearly what I had in mind: a company will offer or "sweeten" an offer a service or product that costs them a short-term loss, in the expectation that it will net them a long-term profit overall. Another way to look at it is that the "loss leader" is being subsidized by the rest of the product line or services list.

Mark, your analogy is not extreme enough. It's when the corporation subsidizes its local office for a period of time to set unreasonably low prices, to take the market away from the mom-n-pops. Then, when they are secure, the subsidy ends and the prices go back up.

Besides, I can think of a better one.

A local Sunoco franchise owner, less than 10 miles from the Sunoco refinery that supplies him, was forced to dig into his own pockets and have a "half-price sale" for one day, because Sunoco refused to reduce its wholesale price and allow him to stay competitive with his rivals at the same intersection and within a block of his station. He even threw in free hot dogs and hamburgers. People were avoiding his station in droves, and he couldn't blame them one bit.>

My husband and I went to a Walmart pharmacy a couple of days ago to get a list of prescriptions being discounted. Surprise. They are only offering the program in Tampa, FL. It will be expanded in 2007. Who knows when it will get to the rest of the country.

Anna>

Anna, the original announcement indicated that Wal-Mart would offer it throughout Florida by January 2007, and, if successful, nationwide within a year after that. Hard to blame them for ensuring they're not swamped. They did, after all, choose a pilot market rich in senior citizens (in the winter, no less). Estimates given by Wal-Mart indicate that Florida can expect to save $100,000 per year in Medicaid costs.

Overall, though, I get the impression here that the only Wal-Mart action that will satisfy is for Wal-Mart to shut down half (or more) of its stores, raise prices by 30% (or more), and offer luxurious insurance policies to all its employees. No out-of-the-box thinking allowed.

I pay for my family's heath insurance myself. It's not a corporate plan. It's also budget-priced, so it doesn't cover every ache and pain. For me and my family, this Wal-Mart program could be a real boon.>

Some of us can look back and remember prices that were affordable.As a retired layman,i see that wages have not changed much,if any, in some cases.All those merchants back then did just fine with their prices. Some retired early laying in the sun on beaches now.So if it started a trend in any profits down the line,good for them. But knowing how our society has delt with such things,because of greed,i doubt very much it will hurt anything.And so much for all these so called religious People who are a part of the high cost of living we have today.Just puting on a big show.>

Franklin,

You seem to have bought the union line on WM: that they are mean to their suppliers (why did you put suppliers in scare quotes, btw?) and that they don't pay their workers enough.

You're analogy was a huge stretch and only if you believe the union lies will it make sense.

You've been played, as the kids say.>

It does, however, employ bullying tactics and coercive trading with its "suppliers".

Yes, I don't think what Wal-mart does is really bullying in a classic sense. If the biggest kid on the block has all the other kids running away from him he's probably a bully. But if they are running up to him trying to sell him things and he's rejecting their offers, that's just business.

So I agree with JB and pikkumatti: "bullying" is the scare-word of the moment and its widespread use is due to the predominance of the liberal notion that the bigger/richer/more powerful person at the negotiating table is always wrong, or at least the one we should instinctively root against.>

It's not really piling on, guys... except for JB, methinks. Not sure about him yet.

Way up there near the top, Brent offered this story. It is not, by all objective accounts, so unusual for WM to bring in a supplier and dictate what, how and how much the supplier will manufacture. Indeed, the descriptions I've seen remind me more of a group of junkies selling their souls for an uninterrupted supply of their favorite substances.

Well, okay. My analogy is over the top. I will ask you, though, if you know what the major competitive advantage WM has over Target and the rest of the also-rans. The answer is in the compensation they offer their employees.

Pikkumatti, I am looking at the descriptions; I submit none of us has hard data at this point. I will also suggest you rethink your conclusion about "rushing to work at Wal-Mart", because I don't know of anyone starting a brand-new job who can give an honest opinion about where they will be working. A little thing called direct experience is missing in your implied chronology.

I'd also suggest a few other things, based on very real data from 15 years of collecting employment data for my pension clients: a little thing called turnover has a variety of explanations, and for low-wage jobs a big reason is the low wages.

Maybe well could be well advised to step back from our conclusions a bit, eh? I'm willing to recast mine as expectations at this point.

But I'm not willing to soften my view of WM. Not when tens of thousands are included in two class action lawsuits.>

Franklin, you use as evidence: Not when tens of thousands are included in two class action lawsuits.

All that two class action lawsuits require are two plaintiffs, and two lawyers (or two plaintiffs and one lawyer handling both cases). It is not thousands of people banding together to fight the good fight, believe me.

I'd also guess that people applying for work at Walmart (and starting work there) are doing so because that job is better than the job they have at the time (or no job, as the case may be). So each applicant is working from at least two data points. And there are lots of people working from those two data points.

Unless you are assuming that these applicants are all duped rubes who have been drinking the Walmart kool-aid and don't know better. (Which, knowing you, I doubt -- but your comment kinda sounds that way).>

I did mean to address your "data points" as well.

You're right. Those are valid data points. So is that WM is the sole remaing employer after putting the mom-n-pops out of business (which, granted, could have created a net increase in total jobs); that in many areas turnover is the major source of jobs, and a new WM not only adds alot of new jobs, but increases the turnover pool of jobs; that most positions in a large store require little in the way of training-intensive skills.

You will note, I hope, that I'm not trying to repaint the picture into a bleak one. What I am suggesting is that we really need to create a realistic, side-by-side listing of the positives and negatives, because that is the intent of my question: would you buy cheap goods that were stolen? Theft comes in many gradations and forms.>

Rest well, my friend. I understand your fatigue very well.

When you return, I'll be pleased to welcome you to some hopefully less debilitating topics. Be well.

:)>