Major Retailers Wage Havoc on Traditional Pharmacies

Recently Wal-Mart, Target, and HEB surprised consumers and business critics alike by making hundreds of generic drugs available at $4 to $5 per 30 day order. The only requirement, in most cases, being that the person be uninsured. This is good news for consumers and will likely lead to the attraction of many more customers to these retail giants. The action was motivated for several factors, including as a possible response to the criticism waged by health activist organizations who believe big businesses are failing to do enough. A more likely reason is an amazing marketing ploy that will have little effect on the bottom line of these businesses, but will devestate traditional pharmacies.

After the announcement of the change in policy, one of my sons asked me if CVS or Walgreens would soon be following the example of the big retail giants. I told him no and the affect will likely be devestating, because Walgreens, CVS and other pharmacies actually need their drug business -- every penny of it. Wal-mart and HEB can actually afford their pharmacies to be revenue neutral, because they can make money off of all the other purchases people will make while waiting for their subscriptions. Although the traditional pharmacies offer other items, their price margins and ability to operate in a large volume is so small compared to the major retailers, they simply can't compete in this arena.

The success of this policy by the major retailers will force the traditional pharmacies to increase its focus on the senior population who are largely insured and shop out of habit. However, as Baby Boomers age and continue to get their "cheap" drugs from the large retailers, it is likely they will continue to shop there when they become seniors, because they believed they were served better by them. Eventually, the traditional pharmacies will run out of customers or have to change their business model.