Deus Ex Walmart

Nobody saw this coming. Wal-Mart could completely remake the pharmaceutical debate in this country. At a time when big business (and Walmart and pharmaceuticals especially) are being blamed for the evils of the world, the world's largest retailer is poised to sell generic drugs at drastically low prices.

The NYTimes editors finds a way to make Wal-Mart sound bad even now. Their front-page article summary implicitly faults Wal-Mart for not doing this earlier, instead of lauding them for being the first to try it, and resting their criticism on the absurd notion that market power is necessary for a retailer to underprice competitors, which runs counter to economic theory and common sense.*

Wal-Mart to Offer $4 Generic Prescriptions: The pilot program appeared to mark the first time that Wal-Mart has used its unrivaled influence in the U.S. economy to lower health care costs.

Of course, the article presents facts as well as the spin:

Wal-Mart will test the lower prices at 65 stores in the Tampa, Fla., area and, depending on consumer response, is likely to expand the program next year.

The drugs covered by the program treat common conditions like allergies, cholesterol, high blood pressure and diabetes. In some cases, the company said, customers could save more than 60 percent over typical generic drug costs. The lower prices will be available to the insured and the uninsured...

Wal-Mart said it obtained the lower generic drug prices by squeezing costs out of its already efficient supply chain, rather than pressuring drug manufacturers to lower costs.

In other words, Wal-Mart continues to do more to help the poor than any other force in the U.S., including the government, and does it all for capitalistic reasons and without breaking the law or strong-arming other businesses. What's not to love?

* It's a nuanced but vital distinction. Size allows Wal-Mart to buy in bulk and "in-source" many functions to reduce costs. But market power ("influence" as the Times puts it) generally makes a supplier raise prices. What should be obvious from both theory and data is that Wal-Mart has no market power, but does have size advantages. The result we should see is more stores trying to move in the same direction.