Although it caused quite a stir when the idea was first spoken of, the plan for Wal-Mart to offer generic prescriptions for $4 each has faded from the limelight. A perfect time to approach the topic again. Mainly, how does this sort of price slashing benefit the American mega-corp? And, how do the ripples of this venture effect the rest of the pond?
To tackle the first question is very easy. Why would such a seemingly profit hungry corporation suddenly drastically slash the prices on medications? Because they expect to make a great deal of net revenue doing it. While viewed by many as a selfless act, the Wal-Mart drug plan is not intended to run at any kind of loss. Not a single statement Wal-Mart has made says anything about that, in fact, they readily admit they expect and want to profit from this program. Because Wal-Mart can buy enormous quantities of product, the price for doing so is extremely low per unit. However, instead of making the kinds of profits that turn the heads of any suspicious consumer, they will do so at a much lower profit margin per unit.
And that is where the magic is. They will make less money in each sale, but the idea is that low prices attract large numbers of people. In doing this they increase overall profit by simply driving up the volume of sales. There is no happy, selfless, or saintly motivation here, only the raising of the bottom line in a way that only very large and economically powerful corporations can do. However, for every action there is a reaction.
In an article by David Harsanyi of the Denver post, Dr. Jeffrey Zax, an economics professor at the University of Colorado ay Boulder, was quoted as saying this.