Wal-Mart Generics Mislead Consumers

Date: 7 Nov 2006 | posted in: Retail | 0 Facebooktwitterredditmail

This article was written by Stacy Mitchell and Jeff Milchen and originally appeared in the Providence Journal. 

WHEN WAL-MART announced discounts on some generic drugs at Tampa area stores, its executives probably hoped for favorable publicity in Florida media. So Bentonville, Ark., where the chain is based, surely was festive the next day when sweeping headlines like “Wal-Mart to sell generic drugs for $4 a month” ran nationwide.

With the media providing better advertising than even a multibillion-dollar corporation can buy, Wal-Mart cleverly pumped out another press release announcing drug discounts in 14 other states and was rewarded with another bonanza of national headlines.

But was this really front-page news?

First, there still are no price cuts whatsoever for Wal-Mart customers in 35 states.

Next, Wal-Mart is not discounting generic drugs in general: It offered the $4 price on 291 of the several thousand generic drugs commonly available.

Further, even a casual look at Wal-Mart’s initial list revealed just 124 different drugs (later increased to 143).

So where did the 291 come from? One needn’t have looked past the letter “A” to see: 12 different variations of the antibiotic amoxicillin. Many other common drugs appear in multiple dosages, including some already available for less than $4.

In the end, a global corporation decided to discount a small portion of one product line in a few locations and received millions of dollars worth of free publicity promoting its “low-price” image.

The benefit to Wal-Mart was huge. A poll by The Wall Street Journal found just 13 percent of respondents usually filled prescriptions at Wal-Mart, Target or other mass merchants. That was before Wal-Mart’s PR stunt. After the media barrage and matching offers by Target and other mass merchants, a stunning 50 percent of those respondents said they would be likely, very likely or “absolutely certain” to fill prescriptions at these stores.

They should think twice.

True, certain Wal-Mart customers who need one of the chosen drugs and lack insurance will save money. But unless shoppers check in advance to see if their needed medication is among the select few, they’re likely to become victims of what the National Community Pharmacists Association calls “a classic bait-and-switch.”

Unfortunately, the relative costs and benefits of buying drugs from various sources remain largely unknown to most citizens. Contrary to common perception, the evidence overwhelmingly indicates independent pharmacies, not Wal-Mart or other chains, usually provide the best value.

In 2003, the State of Maine researched prices of 15 common prescription drugs at independent and chain pharmacies of all kinds statewide. The 10 lowest-priced pharmacies all were independents, beating all five Wal-Marts in the study.

Around the same time, studies by New York City and by Senior Action Council in Albany, N.Y., also affirmed lower overall drug pricing at independent pharmacies than chain competitors.

And independents not only compete on price, they do it while offering more than just pills. In 2003, the venerable Consumer Reports magazine surveyed 32,000 readers about their experiences at thousands of pharmacies, including independents, chains and those within supermarkets and mass merchants.

Though mass merchants had a small edge on price alone, independents trounced the chains in overall value by “an eye-popping margin.”

The survey found all chain stores were more likely to lack a needed medication, took longer to get out-of-stock medications, and provided less personal attention compared to independents. And personal service from your neighborhood drugstore means more than asking “how’s the family?” For anyone taking multiple medications, their pharmacist’s attention can be crucial to avoiding dangerous drug combinations.

Unfortunately, the credulous coverage of Wal-Mart’s drug promotion is not exceptional. Last November, the company released a self-commissioned study asserting that Wal-Mart saved $2,329 annually for an “average” household — a remarkable claim that proved grossly inaccurate owing to serious flaws in methodology. Yet national media outlets promptly trumpeted the results (some still cite the study)without providing independent analysis.

The massive promotion budgets of national chains can lead even critical thinkers to perceive, often wrongly, that chains provide greater value than our neighborhood businesses. Reporters and editors should help their readers make fully-informed choices by providing independent analysis, not just a critic’s sound bite, when Wal-Mart issues its next press release.

Americans should know they don’t have to choose between competitive prices and quality service — they likely can receive both at local businesses that invest more in their products and services than public relations.

Jeff Milchen is a co-founder of the American Independent Business Alliance, based in Bozeman, Mont. Stacy Mitchell is a senior researcher with the Institute for Local Self-Reliance, based in Minneapolis, and the author of Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses (Beacon Press, 2006).

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Stacy Mitchell

Stacy Mitchell is co-director of the Institute for Local Self-Reliance and directs its Independent Business Initiative, which produces research and designs policy to counter concentrated corporate power and strengthen local economies.