When the health care Oscars are announced in 2010 for top roles, the health care academy won’t know whether to cast Wal-Mart as the lead, supporting, director, or producer in health care.

Wal-Mart is the third largest pharmacy chain in the U.S. As #1 on the Fortune 500 list, the retailer’s role as a jumbo employer means it has clout in health care negotiations and in the entire American health system. According to the company’s CEO, the company may enter the pharmacy benefits management business.

During the company’s annual “Year Beginning Meeting” last week, Wal-Mart CEO Lee Scott talked about the company’s initiatives in health care and energy. In health, Scott said that Wal-Mart would continue to add employees to its health insurance roster, grow the volume of electronic prescriptions, and provide employees with portable electronic health records by the end of 2010.

Furthermore, Scott said Wal-Mart plans to help employers, “manage how they process and pay prescription claims.”

In 2006, Wal-Mart drove down the price of (older) generic drugs to $4 per prescription. Several pharmacy chains followed Wal-Mart’s lead down the cheap generics road, including Target, among others. Wal-Mart’s move disrupted the retail pharmacy market and also angered a lot of branded prescription drug companies. Consumers, especially the uninsured, welcomed this move, which helped to endear the Wal-Mart brand among people who didn’t feel they had access to prescription drugs.

Now, it appears that Wal-Mart will enter the pharmacy benefits management (PBM) business. This move will further consolidate the company’s leading role in health care in the U.S. Their plan is to work with employers to manage prescription drug costs.

PBMs behave much the same way Wal-Mart does as a behemoth purchaser of consumer goods: PBMs use their size as bulk prescription drug purchasers to extract lower prices for drugs on behalf of their employer-clients. Some PBMs also own their own pharmacies (both brick-based and mail order).

One area where PBMs can make lots of money is in marking up the price of cheap generic drugs. Billions of dollars of branded, blockbuster Rx’s have recently coverted to generics, and others will be switching to generic over the coming months.

Note that, in electronic records, Wal-Mart has already begun rolling out electronic health records (EHRs) to some employees. This is in concert with the Dossia project launched in 2006 which includes the retailer along with a host of other large employers including Intel and that great health benefits pioneer, Pitney Bowes. Dossia is working with Children’s Hospital in Boston on this round of the project which will be based on Indivo, Children’s EHR. For more history on Dossia, here is a good source.

Health Populi’s Hot Points: I’ve read a few analysts’ reports that aren’t making a big deal about Wal-Mart’s PBM announcements. I think they’re missing the bigger picture here — that of Wal-Mart as a growing health care force in the U.S. While there is great focus at the moment on the 2008 Presidential candidates’ health care platforms, I would argue that for now, and probably for the next few years, health reform action will be at the employer level for commercial coverage, and at the state level where Governors are working hard to balance budgets and still provide health care to their uninsured citizens as well as those covered by Medicaid. Wal-Mart’s health plan now covers about 1.1 million people, making it one of the nation’s largest patient pools. We are witnessing some vertical integration where, enabled by the EHR, Wal-Mart will have the potential to marry health claims data with prescription drug information and, potentially, the kind of lifestyle information gleaned by Safeway in its food project I talked about here in Health Populi on January 22. The scale of Wal-Mart’s health vision is compelling. If Wal-Mart introduces the greatest possible level of transparency into its PBM process, it could positively transform the sector. This would benefit U.S. health care, and also Wal-Mart’s spotty public image in health — an area it has clearly targeted for growth.

1 Comment on Wal-Mart’s leading role in health care — now, as PBM

Health care at the bottom of the pyramid | Health Populi said : Guest Report 10 years ago

[...] been a leader in discounting prescription drugs, especially for generics when the company innovated the $4 drug fill for a 30-day supply of generics in [...]

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