UPDATE: Wal-Mart Takes Mail-Delivery Drug Service Nationwide
September 15 2009 - 4:39PM
Dow Jones News
Wal-Mart Stores Inc. (WMT) is expanding its prescription
mail-delivery program nationwide, a move that shows the world's
largest retailer isn't shying away from the pharmacy space.
Wal-Mart's expanded mail-order program, launched as a pilot in
Michigan in May, offers customers a 90-day supply of 300 generic
drugs for $10. It is similar to one launched nationwide earlier
this year by CVS Caremark Corp. (CVS) that offers customers via
mail a 90-supply of more than 400 generic drugs for $9.99, plus a
$10 sign-up fee.
"The main thing to take away from this is they are not going to
let up, especially when they discover a perceived inefficiency in
the system," said Andrew Wolf, a drug-store and grocery analyst at
BB&T Capital Markets. "This is Wal-Mart, and this is what they
do well."
In Wal-Mart's program, no mailing charge is added to the
prescription cost and no memberships or enrollment fees are
required. In addition to the 300 generic drugs available for $10,
the service offers free mail delivery of more than 3,000 other
brand and generic prescriptions at other prices.
Wal-Mart has been ramping up its presence in the health-care
arena for a number of years. Most recently, the retail giant has
been growing a program it started with Caterpillar Inc. (CAT),
which allows companies to buy drugs for their insurance plans
directly from pharmacies rather than through third-party
pharmacy-benefits management companies, or PBMs. In 2006, Wal-Mart
launched $4 fees on a host of generic drugs purchased at its
stores, prompting other drug-store chains to offer similar
programs.
That said, some drug-store analysts say Wal-Mart's mail-order
program expansion alone shouldn't be too much of a threat to drug
stores or PBMs, at least in the short term.
"Mail isn't a real driver in this market," said Bernstein
analyst Helene Wolk. "Mail as a channel has pretty much stayed at a
steady state."
Wolk sees Wal-Mart's expansion of the program as way to appeal
to customers who may not live close to one of its roughly 4,100
locations.
"I think the problem is people don't like mail," Wolk said,
especially as part of a employer mandatory mail program. "They may
see this as access, but they may not see it as preferred
access."
Mail-order prescription fulfillment gained share earlier this
decade, providing a source of earnings growth for PBMs. However,
over the last few years, that growth has stalled. While mail-order
penetration increased substantially through 2005, it has since
plateaued at about 18%, she said.
Still, analysts definitely see Wal-Mart as a worthy pharmacy
competitor. The expansion of its mail drug-program adds another
weapon to the mass retailer's pharmacy arsenal, and it expands on
its strategy to take out the middleman in providing prescriptions
cheaply to consumers.
"They want to win in this space, and they are aggressive," said
Jefferies analyst Scott Mushkin.
Wal-Mart's shares closed Tuesday at $49.93, down 0.9%. The stock
has lost nearly a fifth of its value in the past year.
-By Kelly Nolan, Dow Jones Newswires; 212-416-2167;
kelly.nolan@dowjones.com
(Kathy Shwiff contributed to this article.)