Obamacare hurting Walmart's pharmacies; more insured Americans spells bad news for corporation

Walmart officials are blaming an increase in the number of Americans who gained insurance under federal health reform for its pharmacies taking a financial hit, Carolyn Johnson reports for The Washington Post. "It's one of the dirty secrets of the pharmacy industry that uninsured people frequently pay more for drugs than those with insurance," said Adam Fein, president of Pembroke Consulting.

"That's because the prescription drug plans can use their clout and scale to negotiate lower reimbursement rates with the pharmacies, while uninsured people pay more," Johnson writes. "In addition, Fein said Walmart, which runs the third largest pharmacy business in the U.S. bringing in an estimated $18.8 billion in revenue, has made strategic decisions that may have made it more vulnerable to this shift."

Walmart's move in 2006 to begin offering hundreds of generic drugs for $4 "was novel because retail pharmacies haven't traditionally competed on the price of prescription drugs, which are largely hidden from consumers and attracted people who were paying full price for drugs, without insurance," Johnson writes.

Now that more Americans are using insurance to pay for medication, "the company is seeing lower reimbursement rates from drug insurance plans and a decline in high-margin cash transactions," said Greg Foran, president and chief executive of Walmart. He told reporters during a conference call that it reflects "a marketplace shift in which more customers are now benefiting from greater drug insurance coverage." Walmart reported "that its health and wellness business was growing, including an increase in prescriptions filled but that the profit margins are lower than expected."