• Business Week, Thursday, June 5, 2008 10:30 AM

Wal-Mart Store wants to be the low-cost destination for drugs and health care, doing for the category what it did when it made its initial steps into the food business 20 years ago. Today, groceries are Wal-Mart's biggest revenue generator, making up 41% of its annual sales. Along the way, the retailing juggernaut has dramatically reshaped the grocery store industry.

The chain says that health and wellness products (including pharmacy sales) made up 9% of its overall $374.5 billion in revenues in the 12 months ended Jan. 31. The company is aiming to increase electronic prescriptions at its stores by 400%, to 8 million by yearend. It also is introducing walk-in clinics at its superstores to treat minor ailments and is expanding its $4 generic-drugs program.

Wal-Mart executives say their strategy is to tap into consumers who don't have health insurance. They say that nearly 30% of the $4 prescriptions are being filled without insurance, compared with the industry trend of 10%. Even at $4, generic drugs are not a loss leader at Wal-Mart. In its annual report, the company says that its gross margin increased in fiscal 2008 because of higher sales in fresh food and pharmacy.

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