October 17, 2007
Buehler’s Offers Alternative to $4 Generics
Family-owned Buehler’s is taking the $4 generics program offered by Wal-Mart and others and is raising the price to $5. While on the face of this, the company’s announcement of its plan might appear to be counterproductive to winning customers to its pharmacies, Buehler’s believes that its full offer is superior and shoppers will soon catch on.
Glen Millikan, pharmacy operations manager at Jasper, Ind.-based Buehler’s Foods, told the Evansville Courier & Press, that his company’s plan has a number of advantages over the $4 competitors.
Buehler’s Rx Rewards Program will expand its discounts to medications beyond the 300 on Wal-Mart’s list and will include some brand name prescriptions as well. The company will also offer a free glucose meter for a first-time diabetic prescription along with free health screenings and access to health and wellness information.
“Being locally owned, we felt that it was absolutely essential for our customers to continue to get the best values throughout our stores, from groceries to pharmaceuticals,” Mr. Millikan said.
Moving generics even at low price points is a win for Buehler’s, according to Mr. Millikan. “Naturally you want to dispense the generics because you get a greater profit. The increase of generics is going to dramatically increase,” he told the Courier & Press.
Discussion Questions: Has price comparison become a major factor in prescription medicine purchasing decisions? Has the $4 number become critical for pharmacies to match in the current environment or are consumers open to investigating the details of a program such as Buehler’s to discover if it might actually be more beneficial to their needs?
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This company will show that they are competitive and providing a better offer. It doesn’t necessarily behoove them to try to get the customer most motivated by price, who is going to go to Wal-Mart for the $4 item, but to show people with choicer demographics that Beuehler’s is responsive.
As a waiter, I will never forget one customer who had one of those “Entertainment Passbooks” with discount coupons, usually a buy one get one free. The point from the standpoint of a retailer is to get new audiences to try out the business. But it only makes sense if you get return customers. (And I don’t think many businesses using such promotions have figured out, other than via direct mail, that you need to have a chain of activities to convert a prospect to a sampler to a customer, but I digress.)
He was completely motivated by price, and his passbook looked like it had been eaten by moths, so many coupons had been redeemed.
Let him go to Wal-Mart, and let a customer concerned with both price, value, and quality of experience go to Beuhler’s.
When it comes to actual dispensing of meds, customers need to feel secure in who they deal with. I will use Shoppers Drug Mart as an example. Dispensing fees in Ontario range from 11.99 all the way down to 3.99 with Shoppers being at 11.99. Yet they still blow away the competition in terms of their script database. Why? They offer a plethora of additional services to help the customer better understand the meds they are taking and improve the customer’s well. being. Buehler’s offering of premium services should make customers take notice and pharmacists need to be behind the program 110 percent for it to work. At SDM, the pharmacists are always talking up the different programs available with customers so they honestly feel like they are getting value for the extra dollars they are spending.
Most prescriptions are paid for by third party–I believe the number is now about 85%. So you are dealing with a very small part of the customer base. Shopping price for prescriptions matters less now that more people are covered by some kind of insurance and only have their co-pays to pay. In some cases, the $4-$5 price is lower than their co-pay. In addition, those consumers who are going to Wal-Mart to save $1 rather than a more convenient location probably have less spendable income, so the idea of drawing these customers and then expecting them to make more purchases is probably low. I think this plan from Buehler’s make sense in that it indicates to these customers that they do not have to go elsewhere to get what they want.
The location of the store also matters. If I live close to a Wal-Mart, I would get my Rx filled there. If I stay close to a Buehler’s and shop there for my consumables, I wouldn’t move for a $1 saving. I believe that this, along with the RPh/patient relationship would decide if the $5 attempt is successful.
Either way, it’s a worthy attempt towards identifying the driving factor for Rx purchases. And on a similar note, Costco–which offers 100 day refills for $10–isn’t doing too badly, so it’s not just price….
From what I have hear about these “$4” drugs from employees, this is more of a dog and pony show. Most of these drugs were fairly inexpensive anyway. People need and want savings on the big expensive drugs. With HSA’s, this is more important than ever.
The heaviest users of prescription drugs are the elderly, and since they’re often retired, they have the time and the motivation to shop around to save money. Furthermore, since many prescription drugs are long-term repetitive buys, and many folks need multiple drugs, the savings add up. A 70 year old couple might need 5 drugs each month. That could be a $60 savings each year. And Wal-Mart isn’t the only pharmacy competitor. Buehler’s competes against many other drug stores who still sell generics for more than $4 anyway.
Price is and will be more important as more of us follow the “first boomer” into retirement–often before Medicare kicks in and without the benefit of lifetime healthcare benefits from an employer. Having said that, we should also consider that there are many elements to the value equation. The convenience and familiarity of the local pharmacist may be more than enough to warrant an additional dollar versus Wal-Mart. While more consumers trust generic drugs than just about any other non-branded category (due to the perceived assurance of the FDA regulations), healthcare is still a highly charged, emotional subject for many.
The alternative price for Rx drugs is still extremely reasonable at $5.00. However, if my math is correct, $5.00 is still $1.00 more than $4.00 – so the level of consumer acceptance will be only as great as the retailer’s ability to effectively communicate why they’re charging $1.00 more. There are any number of valid reasons. Buehler’s and others will do very well if the right message gets out for the extra dollar.
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This company will show that they are competitive and providing a better offer. It doesn’t necessarily behoove them to try to get the customer most motivated by price, who is going to go to Wal-Mart for the $4 item, but to show people with choicer demographics that Beuehler’s is responsive.
As a waiter, I will never forget one customer who had one of those “Entertainment Passbooks” with discount coupons, usually a buy one get one free. The point from the standpoint of a retailer is to get new audiences to try out the business. But it only makes sense if you get return customers. (And I don’t think many businesses using such promotions have figured out, other than via direct mail, that you need to have a chain of activities to convert a prospect to a sampler to a customer, but I digress.)
He was completely motivated by price, and his passbook looked like it had been eaten by moths, so many coupons had been redeemed.
Let him go to Wal-Mart, and let a customer concerned with both price, value, and quality of experience go to Beuhler’s.
When it comes to actual dispensing of meds, customers need to feel secure in who they deal with. I will use Shoppers Drug Mart as an example. Dispensing fees in Ontario range from 11.99 all the way down to 3.99 with Shoppers being at 11.99. Yet they still blow away the competition in terms of their script database. Why? They offer a plethora of additional services to help the customer better understand the meds they are taking and improve the customer’s well. being. Buehler’s offering of premium services should make customers take notice and pharmacists need to be behind the program 110 percent for it to work. At SDM, the pharmacists are always talking up the different programs available with customers so they honestly feel like they are getting value for the extra dollars they are spending.
Most prescriptions are paid for by third party–I believe the number is now about 85%. So you are dealing with a very small part of the customer base. Shopping price for prescriptions matters less now that more people are covered by some kind of insurance and only have their co-pays to pay. In some cases, the $4-$5 price is lower than their co-pay. In addition, those consumers who are going to Wal-Mart to save $1 rather than a more convenient location probably have less spendable income, so the idea of drawing these customers and then expecting them to make more purchases is probably low. I think this plan from Buehler’s make sense in that it indicates to these customers that they do not have to go elsewhere to get what they want.
The location of the store also matters. If I live close to a Wal-Mart, I would get my Rx filled there. If I stay close to a Buehler’s and shop there for my consumables, I wouldn’t move for a $1 saving. I believe that this, along with the RPh/patient relationship would decide if the $5 attempt is successful.
Either way, it’s a worthy attempt towards identifying the driving factor for Rx purchases. And on a similar note, Costco–which offers 100 day refills for $10–isn’t doing too badly, so it’s not just price….
From what I have hear about these “$4” drugs from employees, this is more of a dog and pony show. Most of these drugs were fairly inexpensive anyway. People need and want savings on the big expensive drugs. With HSA’s, this is more important than ever.
The heaviest users of prescription drugs are the elderly, and since they’re often retired, they have the time and the motivation to shop around to save money. Furthermore, since many prescription drugs are long-term repetitive buys, and many folks need multiple drugs, the savings add up. A 70 year old couple might need 5 drugs each month. That could be a $60 savings each year. And Wal-Mart isn’t the only pharmacy competitor. Buehler’s competes against many other drug stores who still sell generics for more than $4 anyway.
Price is and will be more important as more of us follow the “first boomer” into retirement–often before Medicare kicks in and without the benefit of lifetime healthcare benefits from an employer. Having said that, we should also consider that there are many elements to the value equation. The convenience and familiarity of the local pharmacist may be more than enough to warrant an additional dollar versus Wal-Mart. While more consumers trust generic drugs than just about any other non-branded category (due to the perceived assurance of the FDA regulations), healthcare is still a highly charged, emotional subject for many.
The alternative price for Rx drugs is still extremely reasonable at $5.00. However, if my math is correct, $5.00 is still $1.00 more than $4.00 – so the level of consumer acceptance will be only as great as the retailer’s ability to effectively communicate why they’re charging $1.00 more. There are any number of valid reasons. Buehler’s and others will do very well if the right message gets out for the extra dollar.