The U.S.’s largest drug retailer Walgreen (NYSE:WAG) has injected greater value into its Prescription Savings Club program by adding 300 new “value-priced” generic drugs to the existing 400 generics covered under the program to attract more customers. The savings program is particularly aimed at attracting uninsured customers and improving medication adherence, and it also offers a risk-free guarantee. Walgreen competes with CVS Caremark (NYSE:CVS) and Rite Aid (NYSE:RAD).
Expanded Generic Coverage Would Attract Uninsured Customers & Improve Medication Adherence
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Walgreen’s Prescription Savings Club program offers discounts on more than 8,000 branded and generic prescriptions, vaccines and other items. With the latest addition of 300 new generics, it now covers more than 700 generics drugs, which retail as low as $12 for a 90-day supply. It also provides 5%-20% discount on vaccines, beyond flu shots and includes immunizations for pneumonia, tetanus, whooping cough, shingles and forms of hepatitis.
Through the program, members also get up to 10% discount at Walgreen’s Take Care in-store clinics and on Walgreen, W and Nice! branded products. The savings program is particularly aimed at attracting uninsured customers and improving medication adherence. It is estimated that the use of generics has resulted in more than $1 trillion in savings to the U.S. health care system over the last decade, and now almost half of all brand name drugs in the market have a generic equivalent available.
Walgreen started its Prescription Savings Club program in 2006 and currently has more than 3 million members. It charges an annual membership fee of $20 for individuals and $35 for families (including pets) and also offers a risk-free guarantee wherein Walgreen makes up for the difference, in case members don’t recuperate the $20 annual cost for an individual (or $35 for a family, including pets) in actual savings. Walgreen estimates its Prescription Savings Club program currently saves members on average $170 annually.
We value Walgreen with a $35 Trefis price estimate of its stock, at a 4% premium to the current market price.