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The Walmart effect

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LOUISVILLE, Ky. — Mary Lee Reinscheld became the first Medicare beneficiary to sign up for the Humana Walmart-Preferred Rx Plan, at a kiosk in a Walmart store here earlier this month.

Mary Lee Reinscheld became the first Medicare beneficiary to sign up for the Humana Walmart-Preferred Rx Plan, at a kiosk in a Walmart store here earlier this month.

The event was a milestone in the discounter’s ongoing quest to help make quality health care more affordable and accessible. The prescription drug plan (PDP), the first that Walmart has been directly involved with, has a monthly premium of $14.80, which, according to data from the Centers for Medicare and Medicaid Services, is the lowest fee for any stand-alone Part D plan available in all 50 states and the District of Columbia, and less than half the average for 2011.

"As the world’s largest retailer, Walmart is uniquely positioned to help drive down the costs associated with prescription medications," says John Agwunobi, president of the company’s health and wellness division. "Our participation in this plan is another example of Walmart’s ongoing commitment to helping customers save money and live better, especially when it comes to providing affordable health care."

If the PDP, a joint venture with Humana, a leading provider of health care coverage and supplemental benefits, is successful, it could serve as a catalyst for lowering Medicare Part D premiums as other plan sponsors become convinced that they need to reduce fees charged to participants to remain competitive. Early indications are that senior citizens and others covered by Medicare have a high level of interest in the Humana Walmart PDP.

Whatever the fate of the new plan now that the Medicare Part D enrollment period for 2011 has started, it won’t be the retailer’s last effort to influence the evolution of health care delivery.

"As we look ahead, our intention is to continue to look at large spaces within the health care system and identify places where we can lower costs," notes Agwunobi, who was trained as a physician and served as an assistant secretary in the Department of Health and Human Services before joining Walmart three years ago. "Future initiatives might be in the store like our $4 generics plan, or they might be outside the store and involve such things as free home delivery of medications or the pharmacy web site that we’ve been enhancing quietly over time.

"They also might involve programs at the employer level, insurance plans like what we’ve done with Medicare Part D, diagnostic services or the supply chain for health care providers. We’re confident that we’ll find places where we can, in effect, lower the cost so that more people have access to health care."

Agwunobi’s vision is to take the strategy that made the company the world’s largest retailer and apply it to pharmacy and related sectors.

"While we recognize that Walmart can’t do everything, we do have a unique competency — this notion of retail discounting — that can have a significant impact,” he explains. “We have a proposition that says if we have lots of customers, that allows us to buy lots of prod ucts and services at lower unit costs, which then allows us to pass those savings on to consumers in the form of lower prices. Lower prices, in turn, attract even more customers and the cycle continues. That’s the engine that drives our business model.

"We believe that if we apply that engine selectively to spaces in health care that are amenable to that kind of approach, we can ultimately help lower health care costs in the United States."

Walmart has already demonstrated its ability to do just that. The generic drug program that the retailer launched in September 2006, which offers many such medications for $4 for a 30-day supply and $10 for a 90-day supply, shook the status quo in community pharmacy.

After initially being derided by many other pharmacy stakeholders (perhaps most notably the National Community Pharmacists Association) as a publicity stunt, Walmart’s initiative resonated with consumers and eventually prompted many chain pharmacy operators to follow suit. To date, the Walmart generics plan has saved the retailer’s customers $3.4 billion, Agwunobi notes. Taking into account the program’s ripple effect would add substantially to that total.

The company continues to broaden the impact of the $4 generics plan by adding more medications to it, says Agwunobi, as well as exploring other areas of health care where it can bring its scale and expertise to bear. It has, for example, negotiated with drug makers to reduce the cost of branded medications, including the rollback of the price for Levitra to $9; teamed up with local hospitals to launch in-store clinics; and worked directly with employers and insurers to build preferred provider networks.

Walmart’s interest in lowering health care costs has not distracted it from the ultimate goal of producing positive patient outcomes.

"You can discount price but you cannot discount quality," asserts Agwunobi. "We clearly understand that there are professional and regulatory standards that always have to be upheld. Given those rules, we still believe that the Walmart model can be applied to health care in a way that helps the average customer as he or she struggles through the toils of making ends meet.

"We expect the Humana Walmart PDP to make a real difference for Medicare beneficiaries, but it’s only a tactical step. The larger strategy is to string together a series of tactical plays that over time have a dramatic impact on lowering costs in the broader health care space."


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