Low-Price Generic Drug Strategy Seen From Wal-Mart

Retail giant Wal-Mart Stores Inc. (WMT), eyeing a long list of brand-name pharmaceuticals about to lose patent protection, is expected Thursday to announce a low-price strategy for generic drugs sold at its pharmacies, according to people familiar with its plans.

The Bentonville, Ark., company has scheduled an announcement Thursday morning at a Wal-Mart store in Tampa, Fla., to detail what it is promoting as a "major health-care initiative." A spokeswoman declined to comment.

It is unclear whether the company, which operates pharmacies inside its discount stores, has struck exclusive agreements with generic drug makers to lock in prices. The generic drug business is a $27 billion-a-year business and is a key part of efforts to lower health-care costs.

A low-price guarantee by the company, because of its sheer size, could affect the pricing of existing and new generics coming to market. The generics made up about 56% of all prescriptions filled last year, but only 13% of spending on drug spending. Exclusive agreements to provide Wal-Mart's more than 3,000 U.S. stores with a particular drug could prove a boon for those selected.

Over the next two year, analysts estimate patents on about 75 brand-name drugs, including such multibillion-dollar-a-year drugs as antidepressant Zoloft and high-blood-pressure drug Norvasc, will lose patent protection. The resulting wave of new generics will help pharmacies, which get the majority of their profits from generic drugs. Profits on brand-name drugs are typically less because of the manufacturers' control over pricing and distribution.

Prices of generic drugs, however, vary widely from pharmacy to pharmacy. A Wal-Mart pledge to offer the lowest prices on widely used generics could spur other retailers to do the same, say industry observers.

The pledge could also benefit Wal-Mart. Its pharmacy business has stagnated recently. It reported pharmaceutical revenue of about $19.94 billion in the fiscal year ended Jan. 31, compared with $20.61 billion a year-earlier.

The company has been delving into offering convenience clinics at its stores. It has signed agreements to open about 50 in-store clinics with companies including Intrepid Holdings Inc. (ITPD) and InterFit Health, both Houston-based, to provide care for common, minor maladies.

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