Summary
WalMarts strategy on expanding $4 generics is not at a loss. They are taking a number of generics (in the hunderds) that are nominaly priced and selling them to consumers and still making a profit.
Analysis
This strategy seems to be bringing in more foot traffic to their stores and should increase sales of other medications. The reason why many retailer like CVS and Walgreens have not competed is that they are sticking to a phenomemnon of average prescription dispensing costs. This creates a floor at CVS or Walgreens ranging between 8 to 10 dollars. Their position to do this is that it costs as much as 8 dollars to fill a prescription (pharmacists time, materials...etc). So in the case of many generic drugs that cost pennies per pill and result in a prescription that is less than $1, they (both CVS and Walmart) are still profiting. Now in the case of insurers and PBMs, the landscape is mixed around whether a patient must pay their generic copay (avg. about 7 to 10 dollars) or if less, the cost of the generic drug. Now this is all based on contracts held by the PBM and the retail pharmacy.
