CVS vs. Wal-Mart: Chains Cut Generic Drug Cost

CVS vs. Wal-Mart: Chains Cut Generic Drug Cost



CVS vs. Wal-Mart: Chains Cut Generic Drug Cost

Introduction

The pharmacy market is among the industries that have a tremendous impact on the finances and the well-being of the population of our country. Pharmacies are active in the market for drugs. This market has special characteristics which make it so distinct from other markets; for instance, patients or final consumers are not absolutely responsible for the choices they made because they have been advised by their primary care physicians to take a pharmaceutical or combination of medicines.

The fact that consumers can avert other persons from using the drugs and diminishing another person's ability to use it makes this a resource that is both rival and excludable; another important characteristic of this market is that consumers often manage not cover the cost of the drugs themselves but are relying on health insurance or government assistance.

The pharmaceutical market is prone to so many market failures that has compelled the government to intervene heavily at all levels of the supply chain; some of the positive consequences of government intervention are accessibility, cost and quality of medicines.

The pharmaceutical market is characterized by high investment in research and development of new drugs, which are defended by intellectual house rights; in alignment for a manufacturer to attain a profitable grade in the pharmaceutical market the medicines are defended by patents which restricts competitors from free traveling on the inventors discovery; although patents impose application barriers that creates a natural but temporary monopoly for the pharmaceutical producers. This monopoly leads to inefficient cost levels, which in some countries the cost obtained by producers of drugs in subject to cost regulation.

Discussion

Wal-Mart Stores Inc., the world's biggest retailer, will slash prices on generic drugs in Florida as it tries to lure customers to its pharmacies, persons familiar with the company's plans said. The retailer is decreasing prices on generic versions of 200 to 300 peak prescription drugs to as little as $4, from an average of $25 to $30, the persons said. The company will test the plan in Tampa, Florida, then slash prices in the rest of the state on Jan. 1, said the persons, who turned down to be recognized because the plan won't be publicly announced until tomorrow.

Wal-Mart is decreasing pharmaceutical prices at a time when health costs are soaring and a record number of Americans don't have insurance. Lowering prices may assist attract more customers who otherwise may not have shopped at Wal-Mart, said Patricia Edwards, a Seattle-based cash manager at Wentworth, Hauser & Violich, with $8.2 billion in assets, encompassing Wal-Mart shares.

When Wal-Mart tackles a new market, it has sufficient brawn to angle prices for every player in the game. The retail leviathan's low-price generic pharmaceutical program — announced less than two years ago — has been credited with shaving a billion dollars off of America's pharmaceutical bill. Smaller competitors have often been compelled to shutter their ...