Wal-Mart expands $4 generic program
BENTONVILLE, Ark. Wal-Mart this morning expanded the list of drugs available under its $4 generic program and added a new $9 pricing tier for birth control and fertility products.
The combination of those changes is expected to result in massive savings for consumers, Wal-Mart executive vice president and chief operating officer Bill Simon told members of the media and financial community during a conference call. Since the $4 program was introduced last year, it has saved consumers $610 million and the 331 drugs that are part of the program account for 40% of the prescriptions filled at the more than 4,000 pharmacies located in Wal-Mart Stores, Sam’s Clubs and Neighborhood Markets, according to the company. With the changes announced this morning, the program now includes a total of 361 products made up of 157 compounds that cover 95% of the conditions for which doctors write prescriptions, according to Simon, who added those products will account for a figure well north of 40% of the prescriptions filled at Wal-Mart pharmacies in the coming 12 months.
Since its introduction a year ago, the flat rate pricing program has proven to be wildly successful for Wal-Mart on several levels, Wal-Mart executives insist. It did earn a company subject to frequent criticism and organized opposition substantial favorable publicity that aligned with its corporate messaging around saving people money so they can live better. The program also benefited Wal-Mart’s bottom line, although Simon stopped short of quantifying the impact. He did reveal that the prescription count per day has increased dramatically, same store pharmacy sales have grown at a double digit rate since the program was implemented and that even at $4 Wal-Mart is making a profit on every drug in the program.
“We are making money and we are making more money than we did on our prescription drugs this time last year,” Simon said.
The combination of improved profits and lowered prices was made possible, Simon told media and analysts, because Wal-Mart was able to leverage what he characterized as inefficiencies in the supply chain in order to produce a winning formula for customers and the business. “If there was ever a supply chain that has inefficiencies this would be one of them,” Simon said of the health care system.
He also believes Wal-Mart’s estimate of the amount it has saved consumers understates the full impact on the health care system. That’s because the amount of savings was based on a straightforward calculation of the pricing differential between prices at which Wal-Mart sold drugs before and after the $4 program. Therefore, the figure doesn’t include the impact of competitors’ actions who lowered prices or matched the $4 program or hospital stays that were averted because people with heart disease or diabetes were able to afford medicines, he said.
While the newest changes to the $4 program are not as significant as the launch of the program last September, the prescription drug industry hasn’t heard the last from Wal-Mart as Simon vowed to, “continue to drive this segment until the tipping point is reached.”
Simon was the architect of the $4 program shortly after he joined Wal-Mart, but oversight of the pharmacy and other healthcare initiatives now fall to Dr. John Agwunobi who joined the company several months ago as sr. vp. for the professional services division after previously serving as assistant secretary for health with the U.S. Department of Health and Human Services.
“He will be leading this effort going forward and taking us to place that we never imagined we would go,” Simon said of Agwunobi. “Wal-Mart is going to impact the health care community and its customers in very dramatic ways as we move forward. We are only scratching the surface.”
In terms of the impact on its competitors, it is expected to be minimal, as many still regard the program as “media stunt” designed to steal headlines. “We continue to believe the Wal-Mart generic initiative is largely motivated by public relations, although the company maintains that the program is profitable,” noted William Blair securities analyst Mark Miller in a Sept. 27 research note. “We believe there is significant leverage on pharmacist staffing, so the marginal labor cost should be well below the average cost to fill—which is above $7 per prescription, in our estimation.”
Importantly, Miller believes the impact on Wal-Mart’s drug store competitors will be minor.
“Of the prescriptions for birth control dispensed at Walgreens—and similar figures likely apply at CVS—only 11% are cash-pay prescriptions that would be at risk, according to management,” he said. “Those customers at Walgreens [and] CVS with third-party coverage have co-pays generally well below $9 and thus would not have an incentive to switch to Wal-Mart.”
Exclusive Drug Store News interview: Anderson hopeful for delay
WASHINGTON In a dramatic last-minute bid to avert a critical breakdown in the ability of physicians and pharmacists to prescribe and dispense needed prescription medications to Medicaid patients, both the U.S. Senate and House of Representatives this week have passed bills that would delay for six months a requirement that all Medicaid prescriptions be written on tamper-resistant prescription pads.
The requirement, written into an Iraq War Supplemental Appropriations bill, was scheduled to take effect Oct. 1, 2007. It has been the subject of furious lobbying efforts by the National Association of Chain Drug Stores and other pharmacy, physicians and health advocacy groups over the past two months, all of them seeking a delay in the implementation of the new rule by the Centers for Medicare & Medicaid Services until doctors and pharmacists had had time to obtain the new tamper-proof pads, to adapt their workflow processes and to work with state Medicaid agencies to adjust to the requirement.
Efforts to push back the deadline finally bore fruit on Tuesday night, when the Senate unanimously passed S.2085, the Patient and Pharmacy Protection Act of 2007. The bipartisan bill, introduced by Senators Sherrod Brown, D-Ohio, and George Voinovich, R-Ohio, establishes a six-month delay for the tamper resistant pad guidelines for Medicaid prescription drugs. That passage won high praise for Brown and Voinovich from NACDS and the National Community Pharmacists Association.
Subsequently, the House on Wednesday included language to delay implementation of the tamper-proof mandate for six months in another “extender” bill that would extend financing on other health programs set to expire. At press time, the Senate was poised to take up that legislation, and NACDS is hopeful the measure will pass quickly.
If the Senate approves the measure and passes it along to the White House for signature, it would effectively supersede the original Brown/Voinovich legislation. But the effect would be the same: a six-month delay on implementation of the tamper-proof pad requirement, much to the relief of community pharmacy and physician groups.
To get a first-hand look at the tamper-proof issue and the impact of the legislation, Drug Store News on Wednesday spoke with NACDS president and chief executive officer Steve Anderson. The following are excerpts from that exclusive interview:
Drug Store News: What made this so important to pharmacy?
Steve Anderson: The tamper-proof mandate would have been more disruptive to community pharmacy than almost anything we’ve seen recently, and this move to delay is absolutely huge. The timeline was so short in order to comply—in fact we sent a blast fax out to more than 500,000 physicians who write Medicaid prescriptions, and the feedback we got almost immediately was, “What is this all about?” So it’s pretty clear they didn’t know either.
So we’ve made our case, and we’ve really led an effort both on Capitol Hill and at CMS and the White House. NACDS led an effort—we had about 76 health care organizations that signed a letter to Sec. Leavitt asking for a delay, and sent a letter up to the Hill signed by about 45 organizations, but we’ve pulled out all the stops on this and it looks like we’re going to have a reprieve. And hopefully, we can then have a more orderly process in order to implement this mandate.
DrSN: What has to happen next?
Anderson: Now it has to pass the House, which we’re working on as we speak. It passed the Senate last night, and then it needs to be sent to the President. Then the question is, we have to put pressure on the White House. The bills have to be enrolled before they get sent over to the White House, but we’re hoping the President will sign it as soon as he can if it does pass the House. And, we hope that CMS will reasonably enforce this if there is a delay. There’s clear intent from Congress that this needs to be fixed.
The question will be a matter of timing … when it gets sent to the President’s desk. We’ll be urging him to sign it as soon as it passes the House, and then we’ll be in fairly good shape. And hopefully we can work with our partners throughout the health care industry to make sure that there is a more orderly process on these mandates.
DrSN: Is there any indication at this point of what the White House’s position is?
Anderson: No. It was included in the president’s original budget, but I think a six-month delay would be highly reasonable from their perspective. It’s just a process [of] orderly implementation, because obviously pharmacies and physicians will be overburdened with this mandate. More importantly, numerous Medicaid patients would not be getting their medication if this goes into effect.
DrSN: Obviously, retail pharmacy has had problems in the past with this White House. Are there lines of communication open?
Anderson: Oh, yes. I’ve known those folks for quite some time, and we’ve got some new channels of communication into the Bush Administration and the White House that we hadn’t had previously.
I’ve gone over there since I came over [to NACDS] in February, and met with some pretty senior people to discuss the impact some of their policies are having on pharmacy. To be quite frank, some of that was kind of new to some of those people over there. I’m not sure we’ve been communicating pharmacy’s message as an industry as well as we should have, but I think we’re doing a lot better in that regard. This will be a good indication of whether we’re making some progress or not.
DrSN: Is six months enough time?
Anderson: We’ll see. Once we get this thing delayed, then it will be incumbent on all of us in the industry to make sure this gets done. A lot of it is a function of the marketplace, like providing the paper and other things that need to be done for it to be implemented. There’s a lot of moving pieces in the health care industry and pharmacy industry [that have to be in place]…but it’s very important that we all work together to make sure we’re in a better position six months from now than we are today.
DrSN: When electronic prescribing takes hold over the next couple of years, doesn’t that make all of this movement over tamper-proof pads kind of moot anyway?
Anderson: Absolutely, and I mentioned that at the pharmacy conference in Boston. It seems to me highly contradictory that we’re moving toward e-prescribing and health information technology, but at the same time we get mandates like this…that we’re writing things on tamper-proof prescription pads, when obviously e-prescribing should make this moot. Once again, Congress and the federal government have a tendency to issue, on a regular basis, policies that…contradict themselves. That’s why you have associations like NACDS to call that to their attention, and try to fix those issues [laughter]. The burden falls on the pharmacy, unfortunately.
FDA alerts consumers over concerns regarding Cephalon’s Fentora
WASHINGTON The Food and Drug Administration is alerting consumers and health care professionals over concerns of the use of the drug Fentora after reports of deaths and other adverse events.
The deaths reported were the result of improper selection of patients, dosing, or improper product substitutions. The FDA, through its Public Health Advisory and Health Care Professional Sheet warned physicians and other health care professionals that it is vital to follow product labeling when administering Fentora. The FDA also warned about the dangers of using the drug for short-term pain like headaches and migraines, and that is was also important that Fentora not be used in patients who are not opioid tolerant.