Wal-Mart Stores Inc. is promoting itself as a health care solution for businesses in ways that could increase the pressure on chain drug retailers.

Wal-Mart, Wal-Mart Stores, Caterpillar, generic drugs, health insurance, chain drug retailers, generics program, $4 generics program, health care, Robert Summers, Pali Capital, prescription, drug retail, pharmacist, Sam's Club, Charles Redfield, eClinicalWorks, Scot Meyer, EMR

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Inside This Issue - News

Wal-Mart adds to its arsenal

April 20th, 2009

BENTONVILLE, Ark. – Wal-Mart Stores Inc. is promoting itself as a health care solution for businesses in ways that could increase the pressure on chain drug retailers.

One move involves expanding a program under which Wal-Mart partners with companies that fund their own health insurance plans, providing them with generic drugs at discounted prices.

The program has been tested at Caterpillar Inc., which waived a $5 co-payment on generic prescriptions if employees bought drugs at Wal-Mart. The number of employees who took advantage of the program exceeded the company’s expectations, according to Caterpillar officials.

That test program, which started in September 2008, involved more than 70,000 Caterpillar employees and retirees. An expanded program would target the estimated 75 million Americans whose employers finance their own health insurance plans.

The program helps drive pharmacy traffic to Wal-Mart stores and could represent a serious threat to chain drug retailers.

“We believe, much like the $4 generics program introduced by Wal-Mart last year, this agreement represents a structural negative for the drug retail industry and likely leads to both sales and margin disruption,” argued Pali Capital Inc. analyst Robert Summers in a research note that assigned a “neutral” rating to Walgreen Co.

“While Walgreens and others will focus on trying to convince consumers that they offer a more enhanced experience (i.e., pharmacist consultations), we believe the current economic downturn, as well as continually escalating health care costs, has created consumers focused on price.”

On another front, meanwhile, Wal-Mart’s Sam’s Club division has begun selling a turnkey package that is meant to make it easier for doctors with small practices to support electronic medical records (EMR).

The system includes EMR and practice management software and support from eClinicalWorks, and hardware (including three desktop computers, a convertible tablet, a fax server and a laser printer) from Dell Inc.

The package is being sold in Virginia, Illinois and Georgia as part of a phased rollout. Sam’s Club expects it to be available nationwide by year-end.

“We have thousands of members in the medical field today that buy products and services at Sam’s Club to help them run their businesses, and they tell us that cost is a significant barrier to adopting EMRs,” says Sam’s Club senior vice president Charles Redfield. “Over the past year of our partnership [with eClinicalWorks and Dell] we developed a solution that is easy to use, is affordable and will help them do a better job of taking care of their patients’ needs.”

Many experts believe that EMRs could potentially reduce health care costs while improving care, and the recent economic stimulus bill passed by Congress included $19 billion in incentives meant to promote them.

Yet, adoption of EMRs has been slow so far. A survey published in The New England Journal of Medicine in June 2008 found that only 4% of doctors in the United States who provide direct patient care say they have a full EMR system, and only 13% have even a basic system.

The American Recovery and Reinvestment Act of 2009 hopes to drive that number up to 90% in the next decade by paying physicians $44,000 to $64,000 over five years, beginning in 2011, to deploy and make meaningful use of certified EMRs.