Don’t Believe the Hype

Media Promotes Prescription Drug Pricing Stunts at Wal-Mart and Other Mass Merchants While Ignoring Hidden Costs

By Jeff Milchen and Stacy Mitchell
First published October, 2006

Editor’s note: The writers published slightly differing versions of this piece for and the Providence Journal.

When Wal-Mart issued a press release announcing some generic drugs would be sold for $4 at Tampa area stores, its executives undoubtedly hoped for some favorable publicity in Florida media. Instead, they received sweeping headlines like “Wal-Mart to sell generic drugs for $4 a month”— often on page one of newspapers.

After getting better advertising than even a multi-billion dollar corporation can buy, Wal-Mart naturally decided to milk the publicity by announcing drug discounts in most other states a few at a time. Sure enough, Wal-Mart enjoyed wave after wave of free publicity promoting $4 generics.

But was Wal-Mart’s promotion really headline news?

First, Wal-Mart is not offering the deal on most generic drugs — only 300 or so of several thousand commonly available generic drugs.

Yet even a casual look at Wal-Mart’s initial list revealed just 124 different drugs (the company has since added about two dozen).

Wal-Mart mislead consumers by tricks such as counting 12 different variations of the common antibiotic amoxicillin and multiple dosages of ibuprofen — already widely available for less than Wal-Mart’s “special offer,” even after accounting for dosage variations.

Even if you accept Wal-Mart’s claims, the discounted drugs make up less than one-quarter of prescriptions it dispenses (Wal-Mart is offering the deal on only one of the ten most common generic medications, casting doubt even on that claim). But Wal-Mart’s decision to discount a small portion of one product line generated priceless publicity for the corporation’s “low price” image.

The impact was huge and immediate. A poll by the Wall Street Journal found just 13 percent of respondents indicated Wal-Mart or other mass merchants were their usual destination for filling drug prescriptions. After the barrage of media coverage for Wal-Mart’s PR stunt and matching offers by 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, some people who need one of the chosen drugs and lack insurance will save money. But unless shoppers check Wal-Mart’s list in advance, they’re likely to become victims of a bait-and-switch.

Contrary to common perception, the evidence overwhelmingly indicates independent pharmacies, not Wal-Mart or other chains, offer 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. Studies by New York City and the Senior Action Council in New York also showed lower drug pricing at independents than chains.

So don’t assume the buying power of chains translates into lower price. Through group purchasing efforts, independent pharmacies compete vigorously on price and 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 an edge on price alone, independents trounced the big boxes (as well as supermarket and drug chains) in overall value by “an eye-popping margin.”

The survey found independents were more likely than all chain stores to have a needed medication, got out-of-stock drugs faster, and provided more personal attention.

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 that kill thousands of Americans annually.

Unfortunately, the credulous coverage of Wal-Mart’s drug promotion is typical, not exceptional.

Last November, the company touted a self-commissioned study asserting that Wal-Mart saved $2,329 annually for an “average” household — a  remarkable claim that proved grossly inflated due to serious flaws in methodology. Yet national media outlets promptly trumpeted the results (some still cite the study) without offering any independent analysis.

Wal-Mart’s act had one positive impact—increasing awareness and price competition on generic drugs. But 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 pro forma quote from a critic, 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 for public relations campaigns.

Stacy Mitchell is a senior researcher with the New Rules Project at the Institute for Local Self-Reliance and is the author of Big-Box Swindle: The True Cost of Mega-Retailers and the Fight for America’s Independent Businesses.

In addition to directing, Jeff Milchen co-founded the American Independent Business Alliance, which helps communities form coalitions to prevent chains from displacing local businesses.

© 2006 Jeff Milchen and Stacy Mitchell

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