Two years ago, in its relentless drive to deliver always the low price, Wal-mart rolled out its now famous $4 drug plan. The approach was simple – all Wal-mart pharmacies nationwide would offer a slate of generic drugs for $4 cash. Though the plan was straightforward and seemed beneficial for patients, I was suspicious. Wal-mart has always been known for its predatory pricing, its aim to be not merely competitive but to put all competition out of business. Its record in health care was also not very good. In the past, many have accused Wal-mart of union busting and of hiring hundreds of thousands of workers part-time instead of full-time to avoid having to offer them health insurance. Was this another attempt to grow its business by crushing America’s mom-and pop drug stores?
I was also concerned about the impact this cheap pharmacy list would have on private insurers. Insurance companies are always plying patients to take generics. They could simply adopt the Wal-mart list as the default and severely limit access to branded drugs. (Not that I have any objections to using generics, but I shouldn’t have to jump through hoops just because I decide a branded drug is most appropriate. Sometimes it is.) This would put Wal-mart in the position of being the most influential health policy entity in the nation. What Wal-mart carries on its $4 list, everyone would have to prescribe.
That was then. Now that I have been living with the $4 pharmacy for two years, I have to take most of it back. Some of my concerns still stand – I worry about the Big Smiley Face goose stepping over the rubble of community pharmacies everywhere, and I still wish somebody besides Wal-mart would show some leadership in drug pricing.
The problem is, no one else has. And so, I am forced to say, despite its reputation as an intimidator and its poor record in insuring its own employees, Wal-mart is, without question, the most important health care reformer in this country. Other than Medicare Part D, the prescription benefit approved for to retirees in 2006, there has been no change health delivery in the past decade that has improved care as much for so many people. And Wal-mart did it for the people who needed it most – the poor and the uninsured.
When the plan first came out, I assumed Wal-mart would create a “teaser” pharmacy menu – that is, a very incomplete list of cheap drugs that would lure patients in, then encourage them to fill more expensive prescriptions there also. A classic bait-and-switch technique, not unlike the car dealer who advertises a great deal in the paper but only has one of these ultra-cheap cars on his lot.
But that’s not what they did. Wal-mart’s list, as it stands today, is surprisingly robust, and includes a reasonable selection of medications in almost every drug class a primary care doctor could ask for. The breadth of medications for high blood pressure and heart conditions is especially impressive. The list includes 3 of the diabetic medications I prescribe most often, and offers a choice between two fairly efficacious cholesterol lowering drugs, pravastatin and lovastatin.
Even psychiatric medications are fairly well covered, with Prozac, Zoloft, Paxil, and Celexa all on the list. This is a blessing, since the mentally ill are often unemployed and thus over-represented among uninsured patients. It was not that long ago that a depressed, uninsured patient had very few affordable therapeutic options. That is no longer true.
Until recently, my main beef with the $4 list was that it lacked antibiotics, but that has now been addressed also. The current list includes amoxicillin, cephalexin, Bactrim DS, erythromycin, and tetracyline. Hardly a comprehensive list, but one that meets probably 50% of my prescribing needs. The only weakness I now see is the lack of asthmatic inhalers — Wal-mart offers albuterol as a pill, a syrup, and a solution meant for nebulizer machines, but the all-important asthma aerosol pump will still set you back about $25.
One benefit most non-physicians would never think of: the $4 list not only lists the medications but also the doses covered. This circumvents a rather ugly trap big pharma sometimes sets for prescribers. A big drug company will come out with a unique dose of a generic medication and market it as bigger and better. A few years ago, for example, one company marketed a high dose tablet of the antibiotic Augmentin. This tablet, which was basically a double-dose of the standard 500 mg pill, cost 3 times as much as taking two 500s. It was, in short, a scam. Doctor-suckers like me wrote for it because we were not aware of the price difference. The Wal-mart list helps me avoid such pitfalls, letting me know which doses are the cheapest so I can substitute two 20 mg lisinopril pills, for example, when a single 40 mg tab would cost much more.
The beauty of the $4 list is its simplicity. I don’t have to worry about insurance copays, or if the patient can afford the medication. It also saves the patient the embarrassment of having to leave a prescription at the pharmacy counter because the price was much higher than anticipated. Since I know the patient can afford the medication almost no matter what, I have a high degree of confidence that the patient will adhere to the prescribed treatment.
The key to this program’s success has been Wal-mart’s marketing. Unlike every other drug formulary I am familiar with, Wal-mart regularly updates its list online. The pricing is blatantly obvious, unlike other plans where shifting copayments and fluctuating drug prices make the patient’s out-of-pocket cost unpredictable. Also, once a drug goes on the list, it almost never comes off, which is something that cannot be said about any other formulary. When I start a patient on a drug from the list, I am confident that the patient will be able to afford the medication now and in the future. Why doesn’t anybody else in health care understand how helpful consistent pricing is?
In his book Ogilvy on Advertising, advertising legend David Ogilvy recounts how a New York opera company asked him for marketing advice to boost flagging sales. His suggestion: Publish the entire opera schedule in a full-page newspaper ad. The company did, and ticket sales jumped. The point, Ogilvy observes, is that many marketing plans fail because businesses forget the most basic purpose of marketing – to alert the public to the services you offer.
Wal-mart has skillfully followed this strategy, widely advertising its pricing in the media. It publishes its list on a public website so patients can compare their own prescription list to the $4 offerings. For doctors, Wal-mart freely distributes little pocket handbooks that list all of the $4 drugs. This way, doctors can prescribe from the list any time and any place, and refer to it while in the exam room with the patient.
All of these things have made the Wal-mart approach successful. By making its drug plan accessible, cheap, and incredibly easy to understand, Wal-mart has outflanked dozens of national pharmacy chains and done a better job of broadening health care access than all the policy wonks, bureaucrats, and reformist politicians put together.
A new administration and a new Congress is headed for Washington, carrying with them high hopes for substantial health care reform. The talk is about big government solutions, a total regulation overhaul, and the wholesale creation of giant government bureaus. I’m not necessarily opposed to this. The health care system is in such a lamentable mess that any change is a welcome change. Yet, before we commit billions to vast new entitlement programs, we might pause and learn a few things from the remarkable success of the $4 pharmacy.
Wal-mart’s program levies no taxes. It saves billions of dollars. And it has made it easier for docs like me to address the financial problems patients have. Below are the lessons I would like to see our overeager politicos extract from the success of this program.
Pricing is transparent and simple. With this program, everyone – doctor, patient, pharmacist, insurance company – knows exactly how much money is at stake. This makes planning and budgeting very simple.
It is a cash business. How complicated is it to go into a drug store, slap down 4 George Washingtons and walk out with a bottle of pills? There is no need for copays, insurance cards, or middlemen of any kind. This dramatically reduces the cost of the process. Most doctors I know pine for the days when physicians could see a patient, collect cash, and be done with it. Health care reformers should take a hard look at converting at least some aspects of health care to pure cash operations.
The list is simple and unchanging. In the medical business, few things are more frustrating than the constant fluctuation in pricing and reimbursable services. Health plans go from paying in full for a treatment to paying 80% to dropping coverage altogether, sometimes in a span of months. It is not fair to doctors and hospitals, who have to constantly recalibrate their services based on reimbursement.
The plan is preventative. The $4 pharmacy has nothing to do with hospitalization, or cutting edge medicine. It addresses a very simple and universal need among patients. Reformers could make huge strides in health care for very little cost if they would attack some preventative and health maintenance issues piecemeal, instead of comprehensively. I think, for example, it would be a huge step forward for the government to simply pay for annual lab tests (cholesterol, blood count, EKG, blood sugar and electrolytes) for the uninsured. This alone would encourage millions of people to get tested, and would allow patients with chronic diseases to assess and address their health problems before they spin out of control.
It is bottom up. Progressives tend to be big thinkers. They want to reorganize, rethink, rebuild. But not all problems require big solutions. There are 180 million cars in America, but there is no state-sponsored auto repair program. Auto repair shops grow up on their own, in every city and hamlet, and provide access for all. Most services in society are local, from the bottom up. Now, I am not naive enough to argue that health care can be completely managed from the bottom up, but we should be smart enough to recognize bottom up solutions when we see them and do everything we can to help those solutions to take root.
It encourages price sensitivity. The Achilles heel of American medicine has always been the disconnect between cost and decision making. When neither the doctor nor the patient sees the total cost of treatment, it is hard for either of them to make cost-conscious decisions. When patients have to pay, they often are much more deliberative. I have always thought most health solutions should involve the patient bearing at least some of the expense. If the patient never pays, the patient cannot make informed choices and compromises. Who conserves anything that is free?
I know this argument makes me sound like a free-market libertarian, but this is not the case. I want the government to be more active in bringing about universal health care, and I don’t care if it has to raise my taxes to do it. However, I also know, more than most of the poor suckers who are piling into Washington and rubbing their hands in eager anticipation of the great reforms to come, what bitter disappointment they are about to face. In 1994, a few small lobbyist groups shot down the Clinton health plan like target practice. Yes, the Clinton plan was flawed. Yes, it was presented ineptly. Yes, it was only a starting point. But it is a serious mistake to underestimate the ability of certain sectors of the medical community do this again.
Health care is a $2.3 trillion business. There are more companies invested in this huge system as it is than most people realize – hospitals, outpatient surgeries, clinics, MRI centers, nursing homes, home health companies, pharmacies, oxygen providers, medical waste companies – the list goes on and on. When health care reform is finally brought to the national table, every one of these businesses will try to apply its thumb to the scale. And unless most of them are appeased, reform will stall over and over again, provided it does not blow up altogether. This will be a very difficult and prolonged process.
We need to look for easy solutions now, to tide us over until we can get the big stuff fixed. Every little stopgap measure will help. The $4 pharmacy certainly has.