http://money.cnn.com/2006/09/21/news/companies/walmart_drugs/index.htm?cnn=yes
I understand how when you sell a billion of something you can have a small profit margin on each item and still make money, but I don’t entirely understand how they can do this and make money.
they dont NEED to make money on that, it might just be a loss leader
That’s what I’m thinking.
Take a loss on selling them, use it to:
A. Change the public’s opinion of your business practice.
B. Get people in the store. Once they’re there getting the RX, most are going to do other shopping as well.
i’m going to go ahead and say that it costs less than $3 for non-branded medications.
whats more is that the pharmeceutical industry, although competitive, is also one where collusion is rampant for various purposes… one of those is to keep prices high.
example: pharmecuetical companies declined to sell or give their AIDS medication to Africa because they couldnt make any money on it or because it would reduce the price they could charge in richer markets.
eventually they were forced to send the medication there and, as predicted, a fair bit of it ended up online at prices below their colluded market price.
another example that i worked on in University was a loosely based case study on an actual company that was developing a replacement, artificial blood plasma.
one had reached approval stage for use in animals, however, the human plasma was not yet at the appoval stage. a very significant factor in the pricing of the animal plasma was not only what people would be willing to pay but how the price in animal plasma now would affect the price of the human plasma at the release date.
despite the costs being very similar the target price for the human blood replacement was more than 3 times higher than the animal plasma… that is because if it is cheaper to buy a new cat, then fuck Mr. Tipps, buy a new cat. but humans are far less price sensitive with their own health.
drug prices are not cost based, they are market based.
when you churn out 1,000,000,000 of the same pill on an assembly line the cost is far less than a penny each… then 20 cents for the bottle… the rest is distribution and then paying off the people that approved it through the FDA
:bsflag: Lots of generic drugs, especially the ones that have been off patent for years, just plain cost less than $4 bucks for 30 days worth. Not only that, but I doubt that Wal-Mart is offering a discount plan to HMO’s, which are what determines the price that the consumer pays. This is “plan” is really nothing more than an advertising push. :cjerk:
:word: Drugs are very cheap to make and Walmart is not going to lose money on them. They are going to charge closer to what the actual price should be. That why people try to buy their drugs in Canada because they are cheaper there, even though they are the same exact pills. Bing hit the nail on the head.
:word: It is all bout lining pockets unfortunatly. And the healthcare industry is the leader in that. They are like the only poeple who make a product and market it for 1000x it’s production cost.
You would be suprised the cost on some older generic drugs (some around $.02/tab or cap). I highly doubt that walmart is going to lose money on this.
They already said in interviews/statements that they will NOT TAKE A LOSS. the profits may be small, or slim in comparison to what they make from other products, but what a great idea for them. It will definitely attract people away from standard pharmacies and bring them more business in general. Sucks for the pharmacies, but it’s all about business… And like someone said, sell a billion of something at as low as $ .10 profit, thats $100 million, plus probably billions more in extra attracted business.
well, with generics, their just copying someone else’s research, aren’t they? So it’s not like they have as much $$$ tied into R&D/testing/advertising and such as the big companies… thus able to make them cheeper
WM isn’t copying anyone… think of generics as the same as cereals, u can pay $ 4 for cheerios or $ 2.25 for wegmans o’s. same thing. slightly different taste, but it does the same thing. Cheaper has an A in it. They’re just copying. No offense, just trying to educate…
Production costs have little to do with pricing…the reason generics are so cheap is they’re made from reverse engineering the initial product.
Yeah it might cost a “name brand” drug company $.001 to make the little blue pill…but the R&D costs to design that pill are in the millions. Add into that all the drugs that they put millions into and never hit the market and you have very very high “costs”. That’s why there are patents on drugs, so the companies can make back the costs and then turn profit before generics are allowed to get their hands on them.
Don’t get me wrong, drug companies are still profit whores…but it’s not as cut and dry as it seems sometimes.
I also think that life critical drugs should be heavily controlled in pricing and subsidized by gov’ts around the world so that a “cancer pill” or AIDS vaccine (if they’re ever developed) costs the equivalent to $1 US in every country in the world.
ok, I thought so… thats what I was getting at