THE GENERIC-DRUG PRICE BATTLE MOVES TO A STRANGE PHASE

David Merrefield

A fierce competitive salvo was fired last week by Meijer with its unrestricted offer to give any of seven generic oral antibiotics free of charge to anyone with a prescription. The drugs included in the giveaway cover each classification of antibiotics. They are commonly prescribed in connection with childhood illnesses, but have other uses.

Meijer, Grand Rapids, Mich., is the privately held operator of 176 combination discount-supermarket stores. Meijer's free-drug offer was intended to blunt Wal-Mart's new drug-price initiative, which features a number of generic drugs for $4. (See Page 25.)

Wal-Mart's prescription program has obliged several retailers to initiate some competitive reaction to demonstrate a commitment to greatly lowered drug price points. Among them are Target, Kmart, Publix, Wegmans, Giant Eagle and Costco. More will follow.

Retailers involved in these programs, notably first-mover Wal-Mart, have reaped a bonanza of favorable publicity. The programs may also contribute to the common good by underscoring to consumers that generic drugs offer a lower-price alternative. As for retailers, benefits include new consumer interest, traffic, impulse purchases and maybe store loyalty.

But is there a possible unhappy end to such promotions for retailers? One downside is that it won't be too long before the sheen of publicity wears off and it becomes obvious that no more than a miniscule percentage of generic drugs, and no patent-protected drugs, are available under low-price programs. That may force retailers to augment the number of drugs available at negligible cost. Unless drug wholesalers step up to share costs, this may put retailers in the position of losing money on an increasing number of prescriptions and it could undermine the perceived value of prescription drugs, rendering difficult the continuance of high-service pharmacies.

With those factors in mind, let's reflect further on Meijer's promotion. It's likely Meijer has stumbled upon a slippery slope that has much unpleasantness at the bottom. Consider this: What's unusual, if not unique, about Meijer's promotion is that it is a product giveaway without restriction. The offer doesn't require a means test, a lack of insurance, a store purchase, a coupon, a loyalty card or anything other than a prescription. Won't this completely sap the perceived value of antibiotics and other prescription drugs? It might seem churlish to broach reservations about such a giveaway. Yet, consider the extended logic of the promotion: It might be argued that if Meijer - or retailers in general - possesses the wherewithal to give away essential drugs, then there is a further moral obligation. Why shouldn't stores give to any taker much-needed infant formula, baby food or a suite of pantry staples? Indeed, Giant Eagle is matching Meijer's offer in a few stores and has added four generic cough and cold medicines. No OTC product is involved.

Maybe if we lived in a better world, the necessities of life would be provided free of charge by retailers, but that doesn't happen to be a feature of our economic system. Our system holds out assistance to the profoundly indigent, but through programs that convey value for product to retailers.

We'll see how rapidly giveaway programs spread and whether they leap to non-prescription categories. A little caution is called for here.