When Wal-Mart introduced $4 generics, most analysts played down the impact. After all it only affected certain products and wouldn’t matter to people with insurance. I’m happy to say that since the time of the announcement I’ve noted the potential implications (Can Wal-Mart save the American health care system?):
Wal-Mart seems to have a strategy that could fundamentally shift the market: itâ€™s making routine items cheap enough that insurance for them isnâ€™t even worth the hassle. Todayâ€™s announcement of $4 generics is an important step in that direction. It makes the cash price lower than the typical co-pay.
Over time the number of $4 products has increased, some competitors have matched Wal-Mart’s prices, and there’s been an increase in the awareness of just how cheap generics can be. So I was interested to see the Drug Benefits News article, entitled Generic Rx Copays Are Steady or Dropping, With Wal-Mart’s $4 Generics Seen as a Factor.
Despite ever-increasing financial pressures to shift more pharmacy costs to consumers, health plan sponsors in 2008 generally are keeping their generic drug copayments low, while lifting copays on preferred and non-preferred brand drugs, say PBMs and health plans surveyed by DBN. The next big trend, in fact, could be “zero-dollar copays” on generics, say pharmacy executives who attribute the interest in reducing members’ financial barriers in part to Wal-Mart Stores, Inc.’s $4 generics program.
So the Wal-Mart policy actually does affect insured patients after all!
Still, not everyone has caught on to the full implications. According to Tom Tran, senior director of pharmacy at Health Care Service Corporation:
“If the member feels that the medication they are taking is essential, you could raise [copays] $4, $10, and they’ll still see the benefit of taking my drug. I’d rather pay $10 a month than to have my diabetes worsen and I lose my vision and I lose my feelings in my legs and my big toe amputated,” Trans says as an example. “If they don’t see the value of why they’re taking their drugs or disease states, they’re going to see a dollar increase in copays as a burden and not take them.”
Of course Tran is right that it’s worth $10 to avoid having one’s toes amputated, but that’s not the only consideration. Another rational reaction to a co-pay increase could be, “How come I’m paying good money for pharmacy insurance but my co-pay is higher than the full price of a Wal-Mart drug, which I don’t even need insurance to purchase?”