Generic pricing - Marketing or real change?

Implications: Walmart finds a new way to send an old message. Continuing its mission to be a low price leader.

Drug chains do not overreact to the generic pricing counting on their convenience and realizing there is a difference in the customer base of the Walmart shopper and the chain drug shopper.

The next phase, to expand the program to the rest of the Walmart stores, will probably happen on or before schedule and won't change a thing.

Analysis: The recent announcement of a $4 price point on a limited number of generic drugs is a new way for Walmart to skin an old cat. It allows them to send their message of "low price leader" to the consumer in a new way.

Just as the drug chains like CVS and Walgreen have not tried to compete with other price campaigns that Walmart has had in the past they have not and probably will not get into a price war with generics.

Pointing out that the program consists of a small percent of the generics available and an even smaller percentage of their sales, the big drug chains will watch this issue but will probably not make any move unless or until they see a significant impact on their business, which I doubt they will see. In addition to the small percentages noted above, these are also generally older generics, which is partially why their impact is not so great.

Additionally, keep in mind that well over 90% of the drug chain customers have insurance and only pay a co-payment at the pharmacy counter. This program  appeals mostly to the uninsured and low income customer, long a Walmart staple.

The strength of the drug chain has always been convenient locations, service and the pharmacy personnel themselves. It has not been price and won't be price anytime in the near future.

This program is probably a very good marketing program but won't cause a significant shift away from the traditional drug chains.