After several years of tremendous success with its $4 generic prescription drug program, Wal-Mart teamed up with Caterpillar Co. last September to bring an expanded version of the discount drug program to the 70,000 Caterpillar employees and their dependents.  This venture, too, met with success, prompting Wal-Mart to announce its expansion of the program to businesses everywhere.

When Caterpillar employees fill their prescriptions at Wal-Mart pharmacies, they pay a fixed mark-up rate over the store cost of the drugs.  This fixed rate mark-up lowers the price of the drug for employees of the self-insured heavy equipment manufacturer versus the price paid by the general public.  A third-party entity audits the drug pricing schedules, guaranteeing Caterpillar employees are getting drugs at a specially discounted fixed rate and guaranteeing Wal-Mart prices the drugs according to the agreement.  Caterpillar management has seen enough drop in drug costs as a result of the partnership that the company has waived employee co-payments for all generic drug prescriptions that are filled at Wal-Mart.

The partnership has benefited both Caterpillar and Wal-Mart.  Caterpillar knows it pays significantly less for its employees generic drugs and Wal-Mart benefits from the increased traffic to all departments of its stores when a patient also gets a prescription filled at its pharmacies.

Critics of the program say the prescription drug partnership with businesses will drive down the price of prescriptions elsewhere, just as it did when the giant retailer implemented the $4 prescription plan.

Pharmacy benefit managers (PBMs) say the Wal-Mart program threatens to rob them of valuable business opportunities.  Typically, a PBM representative contracts with a business or government body to establish drug coverage for the entity’s employee benefits program.  The PBM works with the business to determine which drugs will be covered under its benefits package and how much they will cost both employee and employer.  A spokesperson for one of the nation’s largest PBM companies says the Wal-Mart program is little more than a campaign to increase traffic to the store.