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CVS Slashes Generic Drug Prices

Stocks in this article: CVX WMT WAG

OKLAHOMA CITY -- CVS-Caremark (CVS) is introducing next month a "health savings pass" that promises cut-rate prices on hundreds of generic drugs used to treat common conditions such as diabetes and high blood pressure.

After purchasing the $10 pass, CVS customers will pay just $9.99 -- a penny less than they would at Wal-Mart (WMT) -- for a 90-day supply of 400 different generic maintenance drugs.

With that same card, cash-paying customers can also receive a 10% discount for treatment provided by the company's in-store MinuteClinics.

"People are struggling with health care costs, especially the uninsured and the underinsured," CVS CEO Tom Ryan stated when introducing the new program on Thursday. "As the largest provider of pharmacy health care in the nation, we felt it was the right time to offer consumers another way to make their health care more affordable.

"This new program will not only provide affordability and convenience," Ryan continued, "but also the superior service and execution that consumers have come to expect from CVS."

CVS could pay a price, however. While the new savings program might attract more shoppers to its stores -- including some who now buy cheap generics at Wal-Mart or Target (TGT) -- it will threaten a key source of profits in the process.

Right now, CVS can often make more money marking up a cheap generic drug than it can by selling its expensive brand-name counterpart. For the drugs covered under its new savings card, however, that dependable margin-booster will shrink or disappear.

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