Wal-Mart Expands Discount Prescription Drug Program to 14 States

Wal-Mart Stores Inc. (WMT) on Thursday said it would begin selling $4 generic prescriptions in 14 additional states, including New York and Texas, speeding up the roll-out of a plan that has put pressure on rival retailers.

Wal-Mart said the $4 program covers a 30-day supply of 143 different drug compounds, representing nearly 25 percent of the prescriptions it currently dispenses in pharmacies nationwide.

The program, initially launched in Florida last month, will be available in an additional 1,264 stores throughout Alaska, Arizona, Arkansas, Delaware, Illinois, Indiana, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Texas and Vermont.

Wal-Mart, the world's biggest retailer, has about 3,900 U.S. stores, including its namesake discount chain, Sam's Club warehouse stores, and the Neighborhood Market grocery chain.

The move comes as Wal-Mart tries to deflect criticism of its employee pay and benefits. Critics contend that the company pays poverty-level wages and pushes employees onto government aid programs such as Medicaid.

Wal-Mart said it filled 88,235 new prescriptions in Florida in the 10 days after it rolled out the $4 program across the state.

Major drugstore chains including CVS Corp. (CVS) and Walgreen Co. (WAG) have not formally matched the prices, although CVS said some of its pharmacists have the discretion to do so.

"I think it was a brilliant move for Wal-Mart," said Darrell Rigby, head of the global retail practice at consultants Bain & Co. "It was a wonderful way of capturing public attention for several weeks now.

"It has already forced some competitors to respond, but just because it's a brilliant move for Wal-Mart doesn't mean that it would be a brilliant move for drugstores," he said.

Shares of Walgreen and CVS were down in early New York Stock Exchange trading on Thursday. They are off more than 11 percent since September 20, the day before Wal-Mart first announced the program in Florida. Wal-Mart's stock was up 53 cents, or 1.1 percent, to $48.88.

Major drugstore chains and industry analysts have downplayed the Wal-Mart program threat, noting that cash prescriptions account for only a small portion of their profits, but investors remained concerned that Wal-Mart would expand the $4 program nationwide and possibly include more drugs.

"I think people are looking at this backwards. It's not how we're reacting to Wal-Mart, Wal-Mart is reacting to the success we've had," Walgreen spokesman Michael Polzin said.

Polzin said the Medicare drug prescription program that started this year helped Walgreen draw more seniors to its stores because co-payments were now the same no matter where they shopped.

"We're winning on convenience and our pharmacy services that are geared toward seniors," he said.

Bank of America analyst Scott Mushkin advised clients to buy CVS stock on any weakness on Thursday.

"CVS, in our opinion, is well positioned to weather industry pressures, including an increased assault from Wal-Mart," he wrote in a note to clients.

Rival discount chain Target Corp. (TGT) has matched Wal-Mart's price in Florida. The retailer did not immediately respond to questions on whether it would match Wal-Mart in these additional 14 states.