The muted reaction from the consumer press to the announcement by Walmart and Humana Inc. that they are offering a low-cost, co-branded prescription drug plan (PDP) for Medicare beneficiaries was puzzling.


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Inside This Issue - Opinion

Walmart may be catalyst in prescription drug plan arena

October 25th, 2010

The muted reaction from the consumer press to the announcement by Walmart and Humana Inc. that they are offering a low-cost, co-branded prescription drug plan (PDP) for Medicare beneficiaries was puzzling.

Designed as a follow-up to Walmart’s vaunted $4 generic drug program, the new plan, which is billed as having the lowest national monthly premium of any PDP available in all 50 states and the District of Columbia, was certainly worth reporting.

The Humana Walmart-Preferred Rx Plan carries a premium of $14.80 a month, which, according to Centers for Medicare and Medicaid Services’ figures cited by executives from the two companies, is the lowest of any national stand-alone Medicare Part D program for 2011, and well below the average of $37 to $38 a month. The co-branded PDP will save each participant some $450 on plan premiums, co-pays and cost sharing when compared with the average total price tag for a Part D plan this year.

“We know every dollar counts, especially when people live on a fixed income,” says Dr. John Agwunobi, president of Walmart’s health and wellness business. “No one should have to choose between buying their groceries and their medications.

“Financial health is a fundamental part of a person’s well-being. At Walmart, the customer is always front and center, and that is why we are committed to doing everything we can to ensure seniors have access to the medications they need at a price they can afford.”

If the retailer and Humana were expecting anything like the windfall of favorable media coverage that followed Walmart’s rollout of its discount generics initiative four years ago, they were surely disappointed.

Unlike that program, which was built around the easily understood proposition that 30-day supplies of hundreds of generic medications were to be sold for $4 apiece, the Humana Walmart PDP and its relation to Medicare are relatively complex and potentially confusing. Perhaps some news outlets were put off by the prospect of trying to explain a government-sponsored benefit plan offered by two private companies, one in the insurance business and the other in mass market retailing.

In order to comply with CMS’ rules governing the marketing of PDPs for next year, Humana and Walmart placed an embargo on information about their plan, a move that may have caused it to get lost in an era when the nonstop 24/7 news cycle is geared to instant dissemination of information and novelty often trumps substance.

If the initial response to the PDP was a disappointment, over time the program is likely to prove a savvy strategic move that once again demonstrates Walmart’s ability to win market share in the drug store sector. At a time of economic hardship unparalleled since The Great Depression, the low cost of the Humana Walmart plan should have great appeal among the elderly, who comprise the bulk of Medicare beneficiaries and are notoriously budget-conscious.

Walmart’s $4 generics initiative struck a chord with consumers, prompting many of them to transfer prescriptions — for branded as well as generic medications — from other pharmacies to the discounter’s stores. Along with the scripts came sales of front-end merchandise that previously occurred elsewhere. The PDP will similarly bring Walmart new pharmacy customers eager to take advantage of the savings that are only available there or through Humana’s prescription mail service.

The level of enrollment in the PDP — Medicare beneficiaries can sign up from November 15 through the end of the year — will be closely watched by competing pharmacy operators and plan sponsors. Walmart’s generics plan was at first dismissed by other retailers, especially drug store operators, who said it would transform community pharmacy from a profession into a commodity business.

Consumers disagreed and, as many of them took their prescriptions to Walmart, competitors changed course. Most chain pharmacies today offer some form of discount or loyalty plan. It will be interesting to see how other PDP sponsors react to the Humana Walmart program when they start to develop their offerings for 2012.

In the meantime, marketing for the Humana Walmart PDP, including information kiosks staffed by the insurer’s personnel in 3,000 stores, is under way. For Walmart, whose commitment to delivering quality products at low prices made it the world’s largest retailer, the fate of the new PDP is now where it belongs — in the hands of the consumer.

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