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Target to sell $4 generics at all its stores

  • Article by: Mike Meyers
  • Star Tribune
  • November 20, 2006 - 10:03 PM

The $4 generic drug prescription has arrived in Minnesota.

Target Corp. on Monday announced that its 1,287 pharmacies in the 47 states where the discount retailer does business have begun selling several hundred generic drugs at a fixed price -- one that experts say is far below the average $20 price for a month's supply of generic medicine.

For the past two months, Target had matched a similar program first started by Wal-Mart in Florida. Wal-Mart had since extended its initiative on generics to 38 states, but neither company had brought the offer to Minnesota.

Wal-Mart did not reveal whether it immediately would match Target's price in Minnesota.

Minnetonka retail analyst Stan Pohmer described Target's action as a smart move, one aimed at deflecting customer impatience with the rolling nature of the $4 generic drug program and undermining the publicity Wal-Mart received in each state where its program was introduced.

"I was looking at the lists last week and asking, 'How come somebody in Florida has this and I don't?' " Pohmer said.

Another Target-watcher expressed doubt, though, that the discounter can match the buying power of Wal-Mart, suggesting the $4 generic drugs will cost Target more to buy.

Target officials were unavailable for comment on their pharmacy strategy.

A matter of scale

"Whether they do it at the same scale as Wal-Mart is an open question," said Joseph Beaulieu, retail analyst at Morningstar Inc., a research company in Chicago. "They [Wal-Mart] keep expanding it to increasingly expensive generics."

When Wal-Mart began its $4 generics program it covered 291 drugs, and the company has since added 40 more. But the programs at Wal-Mart and Target still cover only a small fraction of the more than 8,000 generic drugs on the market. The list of $4 generics available at Target can be seen at the stores or by going to www.startribune.com/a1982.

While smaller retailers emphasize service, such as 24-hour pharmacies or home delivery, the big retailers are using these discounts as another way to bring customers to their stores in the hope that they will make bigger purchases while there, said David Brennan, co-director of the Institute for Retailing Excellence at the University of St. Thomas.

"It certainly gains attention," Brennan said of the Target move. "It takes away one of the reasons to go to Wal-Mart."

The price cuts also could save patients and their employers millions of dollars.

A typical employer, through health insurance policies, ends up paying $50 to $60 a month on prescriptions for each employee and family member on a plan, said Warren Wernick, a consultant at Watson Wyatt Worldwide in Bloomington.

"For every 1 percent increase in generic dispensing, the employer will save 1 percent on pharmacy costs," he said. "If this gets doctors to dispense more generics, there's significant savings for both the member and the employer."

Employees with copayments in the range of $10 to $15 will save $6 to $11 every time they pick up a prescription that costs $4 instead of the typical generic price of $20.

Al Heaton, director of pharmacy at Blue Cross and Blue Shield of Minnesota, hailed the step as a worthwhile effort, despite the fact that 35 percent of its 1.9 million members with drug benefits already get free generics. The rest must make copays.

"This will allow us to treat people at a lower cost," he said. "With a decreasing cost, people would persist on their therapy longer."

The savings for society are substantial if generics become more popular, according to the Generic Pharmaceutical Association.

"Generic medicines can save consumers 30 percent to as much as 80 percent over brand-name drugs," said Andrea Hofelich, director of media relations at the trade group.

Mike Meyers • 612-673-1746 • meyers@startribune.com

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