Viewpoints

With Discount Generics, Chains Take Bigger Medical Role

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Generic prescription drug promotions are apparently here to stay. They have become so prevalent and expected in many places that they may eventually stop being regarded as temporary price reductions.

When Wal-Mart began its $4 program in the fall of 2006, there were many skeptics, as well as competitors who hoped it would soon go away.

No such luck. While the three major drug store chains have stayed on the sidelines, many supermarket chains, as well as Target, have joined the fray with programs offering $4 prescriptions or free antibiotics.

Just recently, Kroger completed the chainwide rollout of its $4 generics program, in the process becoming the second-biggest in the country, with its 1,900 pharmacies. Over 300 generic medications are covered by the program, with a 30-day supply. Family planning drugs are priced at $9.

Other supermarkets with discount generics or free antibiotics include Giant Eagle, Hy-Vee, Meijer, Martin's, Bashas', Schnucks and Publix.

Initially, the programs were designed to help those without insurance, but as costs rise, patients are frequently weighing a $4 monthly script against their insurance co-pay. A discussion of generic drugs offered by the local supermarket or mass merchant store is now part of many consultations with physicians.

A patient will ask the doctor: “You have been prescribing this drug, but my co-pay just went up. Can we look at something similar on my supermarket pharmacy's list?”

As a result, supermarkets have unexpectedly entered the conversation between customers and their medical professionals. With retailers looking for ways to tap the health and wellness trend, this is significant.

It indicates something those in the grocery industry have long known: They can be key players in helping customers manage their health.

What about profit? Retailers must evaluate the increased store traffic and pharmacy business against smaller margins. The cost of the drugs themselves is relatively small. Even at $4, the retailer can make money. The bigger outlay is the cost of dispensing the prescription, estimated by industry sources at about $10.

But with the success of Wal-Mart's program, and the entry of more supermarket competitors, there is an inevitability to these programs. For example, Wal-Mart said recently that the $4 program has increased its market share of the generics on the list, and resulted in over $1 billion in consumer savings.

The question remaining for the grocery trade — especially in view of its focus on health — is what does it do next? After the offer brings more customers into the store, how do they increase food and nonfood sales, particularly of items that might relate to the patient's condition?

Also, what pharmacy programs can be offered to further help individuals and gain their loyalty? How can pharmacists become more involved with their patients? And what local tie-ins can be created with the medical community to increase awareness of the generic drugs offer? Providing the list to a community's doctors in an easily accessible form might be a start.

The generic drug programs open a new world of possibilities to those willing to embrace them. In time, retailers will learn more about their new role and how to build on it.

Contributors

David Orgel

David Orgel is executive director, content & user engagement, of Supermarket News (SN) and its website, SupermarketNews.com. Orgel delivers his opinions on industry trends through a bi-weekly...

Jon Springer

Jon Springer has been writing about food, food retailers and food retailing for more than 10 years, and is in his second tour of duty with Supermarket News. His prior experience includes covering the...
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