Thursday, May 07, 2009

Wally World vs. Express Scripts & a new Wally 3 month test market in Michigan

From John Curry, May 7, 2009
"A key example is Wal-Mart's announcement Tuesday that it is launching a pilot program in Michigan through which it will offer a 90-day supply of 300 generic prescriptions, each for $10 via free mail delivery. The free home delivery program requires no memberships and no enrollment fees."
Express Scripts merger comes as Wal-Mart threat rises
By
ST. LOUIS POST-DISPATCH, May 6, 2009
Talk about good timing. Express Scripts' plan to buy WellPoint's NextRx comes as Wal-Mart Stores grabs for a bigger portion of the prescription drug business, particularly in the profitable area of generics.
If the merger is completed, it will give Express Scripts more clout to negotiate with drug suppliers and compete with Wal-Mart's biggest selling point — low prices.
"You need to be big and getting bigger if you're going to compete with Wal-Mart," said Bob Buchanan, adjunct professor of finance at St. Louis University and former retail stock analyst at A.G. Edwards.
"Express Scripts' planned merger with NextRx should give it more heft to deal with a Wal-Mart that ever so clearly is determined to be an increasingly large player in the overall field of health."

Express Scripts, based in north St. Louis County, administers prescription drugs for private employers, unions and governments through chain pharmacies and independent drugstores. It also manages delivery programs that ship drugs directly to patients' homes, a popular cost-effective option for people who need steady medications to deal with chronic conditions.
Such pharmacy benefit companies are seeing greater competition from pharmacy retailers trying to take a bite of the drug plan business by offering consumers and employers low-priced deals.
A key example is Wal-Mart's announcement Tuesday that it is launching a pilot program in Michigan through which it will offer a 90-day supply of 300 generic prescriptions, each for $10 via free mail delivery. The free home delivery program requires no memberships and no enrollment fees.
For now, the Wal-Mart program doesn't pose much of a problem for Express Scripts because the program is focused primarily on price rather than management services and is fairly limited, said Steve Shubitz, an analyst with Edward Jones. However, that could change if Wal-Mart expands its program to offer more services and newer generic drugs, he added.
"It's a longer term threat," he said.
Last month, Express Scripts agreed to buy NextRx for $4.68 billion. The deal is expected to close later this year after the antitrust waiting period ends. Express
Scripts gets about half of its profit from the home delivery of generics, Shubitz said.
In addition to the $10 generics, Wal-Mart's home-delivery program provides access to more than 3,000 brand and other generic prescriptions. As it launches the free home-delivery service in Michigan, Wal-Mart hopes to expand a pilot program it started with Caterpillar Co. in September through which it provides prescription drugs to 70,000 employees and dependents.
"We haven't announced any companies beyond Caterpillar, but we are in discussions with several others," said Christi Davis Gallagher, a Wal-Mart spokeswoman.
Although Express Scripts wouldn't comment on Wal-Mart's free home-delivery service to consumers, it dismissed Wal-Mart's Caterpillar program as a way to draw customers to their stores.
"While our business model focuses on improving health outcomes while reducing wasteful spending, Wal-Mart's program appears to be designed to build store traffic," Express Scripts said in a written response.
Larry KehresMount Union Collge
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