Wal-Mart's Effect on Part D

Article excerpt

Potomoc Sources

Medicare's Part D drug benefit starts its second year in January with a new wild-card player in the game: Wal-Mart.

The giant retailer, which has transformed markets ranging from toys to groceries, has moved massively into generic medications, offering to fill many prescriptions for $4 apiece. Target, a big retailing rival, vows to match Wal-Mart.

What will be the impact on Part D? It's unpredictable, for an already complex and often confusing program. Polls show that a majority of the 43 million Medicare beneficiaries like their new Part D coverage, but frequently find it puzzling to make their way through the system.

Open enrollment for 2007 starts November 15 and runs through December 31. But officials at the Centers for Medicare and Medicaid Services are urging people to sign up by December 8 to ensure that their coverage runs smoothly in January. This year, mass confusion reigned in January and February as computers and Part D vendors didn't have accurate records about the enrollment for millions of people. About 4 million lowincome people still haven't enrolled even though they are eligible for financial assistance, a significant subsidy that could make their out-of-pocket costs negligible for the drugs they need.


The overall effect of Wal-Mart's entry into the geriatric-medication market on the accessibility of pharmaceutical and on other providers in the marketplace is uncertain because of the multiple millions of combinations of consumers and medications. Wal-Mart and other retailers make possible a mix-and-match game when it comes to buying drugs. The typical Part D drug plan includes a co-payment for prescriptions, which requires calculations for the beneficiary and the family member or counselor helping the elder make a selection. Should older consumers buy the drug through the Part D plan with its co-payment, or should they shop outside the plan at Wal-Mart, which now charges $4 for many popular generic drugs?

The choice is not a simple matter of comparing prices with Wal-Mart or Target's $4. A Part D plan might have a yearly deductible of $200, for example, before the full coverage kicks in. Elders who go outside the plan and buy directly from Wal-Mart might find that those four bucks don't count toward the deductible, so it would take longer to get to full benefits under the Part D program.

Wal-Mart said at first that it would begin the new discount drug program in Florida, and possibly expand in 2007. Instead, the giant retailer moved ambitiously and quickly, and is now selling in the majority of states. The mass marketer is likely to have Ae program everywhere in the country by early next year.

Generic pharmaceuticals account for the majority of prescription drugs filled in the United States, but they amount to a small share of total drug spending. Brand-name medications, protected by patents, are much more expensive than generics. Although many Part D managed care plans require consumers to try one or more older, cheaper generic drugs first before using the latest brand-name version for the same condition, physicians can still appeal these rules if they feel a patient should have the newest medication. Also, the marketing power of the pharmaceutical industry and the patient's hope of getting the latest miracle drug tend to favor branded prescription medicines.


Wal-Mart, because of its sheer size and pricing power, can transform any market it enters. …