Wall Street Journal

Wal-Mart Expands Drug Program
The Wall Street Journal

Wal-Mart is expanding a pilot prescription-drug program for companies, heating up the race among pharmacy retailers to transform the way drugs are priced and sold.

The discount retailer is offering businesses low-priced drugs if they sign up to buy directly from Wal-Mart’s network of in-store pharmacies, rather than contracting to buy drugs through third parties known as pharmacy-benefit managers (PBM). Wal-Mart’s program follows other recent initiatives by big pharmacy retailers to grab market share by offering companies a less-expensive and simpler way to manage their drug plans.

The competition to create more-efficient business plans for pricing and selling prescription drugs has the potential to spur change across the pharmacy industry. When Wal-Mart introduced its $4 generic-drug program a few years ago, it shook up the drugstore business and prompted rivals to introduce their own discount plans, broadly lowering costs for consumers.

Wal-Mart began a trial of its program with Caterpillar Co., which provides prescription coverage for 70,000 employees and their dependents. Wal-Mart negotiated a fixed markup over its cost for the drugs it sells to Caterpillar’s employees under the heavy-equipment maker’s in-house insurance. The markup guarantees a profit for Wal-Mart, while reducing the cost to Caterpillar.

Typically, employers and federal and state governments contract with PBMs to administer their drug coverage, which includes choosing which drugs will be covered and how much they will cost the employers and patients. The new competition from drug retailers aims to provide more certainty — and better prices — to companies.