Rather than telling you which scenario I think is most likely, let’s try a new experiment in interactivity with an anonymous poll. (Don't worry, I can’t identify individual responses, either.) There were more than 1,000 visitors to this blog in the past month, so I'm personally curious to see how many will vote.
SCENARIO 1: MUCH ADO ABOUT NOTHING
- Wal-Mart’s program is much more limited than initial media reports led people to believe.
- Generic blockbusters, such as Zocor, are not included. Most of the drugs are older, low volume generic drugs that are already inexpensive. Consumers will become disillusioned and disappointed as they realize the program’s limitations.
- The actual hard-dollar savings versus current generic co-payments are minimal for consumers with third-party coverage, creating very limited incentives for prescription switching. This strategy will only pick up a relatively small number of cash-pay customers.
- Adding blockbuster generics at $4 per script would be self-defeating because the gain in volume will not offset the loss to Wal-Mart’s earnings.
- Wal-Mart will never be as convenient as the large, well-run chains with premium locations (CVS and Walgreens).
SCENARIO 2: THE EMPIRE STRIKES BACK
- Wal-Mart’s announcement is only the first step of a much larger plan to take pharmacy share away from supermarkets and independents. Evidence includes the national “Pharmacy at Wal-Mart” campaign, adding drive-through service, intriguing experiments that place pharmacy at the center of the store, and back-office software upgrades.
- Wal-Mart’s pharmacies are underutilized based on productivity metrics such as “number of prescriptions filled per pharmacy per week.” Most pharmacies can add incremental volume with minimal additional costs.
- Wal-Mart can build on its new position as the country’s large grocery retailer, placing pharmacy adjacent to food along the “main track” of the store. (Read about the Plano store in New, Upscale Wal-Mart Prototype Moves Pharmacy Centerstage.)
- The list will be broadened to include blockbuster generics as soon as the drugs pass the 180-day exclusivity period. While the PR boost will not match the initial September 22 announcement, Wal-Mart will price new generics to make them less expensive than co-payments.
- More seniors will begin paying out-of-pocket for prescriptions as they hit the donut hole. They will be price-sensitive cash-paying customers who will shift business to Wal-Mart.
Here's a final thought to keep us all humble: Confidence is the feeling you have before you fully understand the situation!