Wal-Mart benefits the public again
see "Wal-Mart Will Offer Generics At Just $4, Roiling Drugstores" (IBD, 9/21/06)
In a tremendous demonstration of market power and benefit to consumers, Wal-Mart has decided to offer some generic versions of medicines for only $4 per prescription. The market reaction in other drug companies was swift and brutal with the two largest drug store chains, Walgreens and CVS, each losing at least 7% of their market value as stock traders reacted (probably over-reacted) to the competition. Other drug store chains and generic drug makers also had significant sell-offs.
The way to look at the market impact of Wal-Mart's announcement is that the market value loss in all those companies is a reflection of how much less consumers will end up paying for medicines because of the move. It is not so much about the 291 drugs on the initial list of the $4 program, but the possibility that other more profitable drugs will eventually be targets of Wal-Mart's competitive power.
It's a subject I'll be writing more about soon, but this is another great example of Wal-Mart benefiting the consumer and particularly the middle- and lower-income consumer. Yet the Democratic Party, nominally the champion of the little guy, has made attacking Wal-Mart one of its primary campaign strategies despite the fact that a majority of Wal-Mart shoppers are probably Dems and, given that they could be shopping elsewhere, it is reasonable to presume that they love saving so much money at Wal-Mart.
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