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Just when you thought the low end of the generic drug price spectrum couldn’t get any more commoditized, the $2 price point debuted with a big splash in September 2010.
Walmart stores tossed the rock that made the splash when it partnered with insurance giant Humana to launch a new, steeply discounted Medicare Part D drug coverage plan for 2011. Four months after both companies announced the venture, the ripple effects are still washing over retail pharmacy. But its long-term impact — namely, its ability to wrest a big chunk of the huge prescription drug market for seniors away from Walmart’s competitors and move it to Bentonville, Ark. — remains to be seen.
The strategy behind the launch of the Humana Walmart-Preferred Rx Plan is almost stunning in its simplicity and its boldness. For a cut-rate monthly plan premium of $14.80, Medicare beneficiaries in all 50 states can gain access to basic Part D drug coverage costing less than half the average national monthly premium set by prescription drug plans serving Part D, according to Walmart and Humana. But the real market-moving potential comes from the plan’s ability to lure Medicare beneficiaries to Walmart’s own stores.
To wit: The Preferred Rx Plan gives favored status to seniors who fill the Part D prescriptions at Walmart stores’ own pharmacies. Medicare beneficiaries who enrolled in the plan get low co-payments when they fill their prescriptions at a Walmart, Neighborhood Market or Sam’s Club pharmacy, with in-store co-payments that start as low as $2 for generic prescriptions at the company’s own pharmacies.
In effect, the plan cuts in half the out-of-pocket costs many Americans pay for widely dispensed, multisource medicines.
“This new co-branded prescription drug plan,” the two companies asserted, “can save a typical Medicare Part D beneficiary who enrolls in the Humana Walmart-Preferred Rx Plan an estimated average of more than $450 in 2011 on plan premiums, prescription medication co-payments and cost-shares, when compared with the average total costs for a Part D prescription drug plan in 2010.”
It wasn’t long before Walmart’s competitors jumped into the $2 generic co-pay contest. In late November, Kroger and Safeway became the first big pharmacy operators to respond, announcing a new, low-price plan for Medicare beneficiaries, in partnership with UnitedHealth Group. Like Walmart/Humana, the plan is a game-changer.
Called Pharmacy Saver, the new program is a collaboration among Kroger, Safeway and United’s Prescription Solutions affiliate. It will allow members to purchase some generic scripts for $2 for 30-day and some 90-day supplies. It applies to hundreds of prescription drugs, including 8-of-the-10 generics most commonly used by UnitedHealthcare Medicare plan members.
Within a few weeks of that announcement, Target, H-E-B, Hy-Vee, Publix Super Markets, Food Lion, Bloom, Harveys and Sweetbay Supermarket all joined the insurance company’s Pharmacy Saver program, in time for the plan’s launch at the beginning of this year.
For millions of seniors, that means that the new price expectation for hundreds of commonly used generics is two bucks for a 30-day supply. For the nation’s pharmacy retailers, it means that the competition for the low end of the generic prescription market is tougher than ever.