Drug war escalates

Following Wal-Mart's lead, CVS is getting into the discount prescription game by offering 90-day supplies of more than 400 generic medications for $9.99. The low-cost strategy is a way of getting customers into the store so that they can also buy toothpaste, aspirin or whatever at retail prices. (It's the loss-leader strategy that supermarket chains use around Thanksgiving when they give away turkeys.) To get the $9.99 deal, customers must pay an annual fee of $10. From the LAT:

Gone are the easy-money days when drugstores could sell a month's supply of a generic prescription for $8 and pocket the markup of 50% or more. "Generics used to generate a significant amount of profit, and that's all been changed by Wal-Mart," said Joel W. Hay, an associate professor of pharmaceutical economics at USC. "That's really squeezed the rest of the retail pharmacy industry. And now they are getting the price down to where there is no profit left, or very little."

Still, competition for the prescription traffic is fierce. Millions of aging Americans are being treated for high blood pressure or cholesterol, allergies and other chronic conditions that send them in for refills. Drugstores and groceries are fighting to tap the wallets of these reliable repeat customers. On top of price cuts, many big retailers are trying to steal one another's customers with coupons paying as much as $30 for each prescription transferred from another pharmacy.