Free Drugs! Meijer Ups the Ante

Last Updated Aug 26, 2010 2:55 PM EDT

Meijer is offering free diabetic drugs, and if past is prologue, other retailers will follow. The initiative covers three dosage sizes of Metformin Immediate, a popular type-2 diabetes drug.
Why give away the store? For regional retailers that emphasize community attachments, providing free pharmaceuticals is a good way to be neighborly. And it can also help to keep shoppers away from the ubiquitous drug-store chains.

Although the privately-owned Meijer only serves five states (Michigan, Ohio, Indiana, Illinois and Kentucky), it rings up an estimated $14 billion in sales. It is ranked number 28 by the National Retail Federation, putting it between Gap (GPS) and Staples (SPLS). So when Meijer rolls out a major initiative, it can launch big changes.

In 2006, for example, Meijer began to provide seven generic antibiotics â€"- the group most commonly used for children â€" free of charge to anyone with a prescription.
In response, one after another, major drug retailers and supermarket chains launched and then expanded free- or low-priced drug initiatives.

Then in 2008, Meijer began to offer free prenatal prescription vitamins. Again, other retailers followed suit, including groceries like Schnucks, Minyard, Bashas' and Marsh. Schnucks also offers free antibiotics, as do Ahold USA's Giant and Stop & Shop stores and the Publix supermarket chain.

Free and discounted drugs are a big deal. Meijer says it has filled more than five million free antibiotic prescriptions, and more than 500,000 prescriptions for free prenatal vitamins. The combined cost of all those drugs to consumers would have been more than $90 million, the retailer estimated. That's the price of getting noticed in the drug game.

Meijer has fewer than 200 stores. CVS (CVS) has about 7,000 and Walgreens (WAG) almost 8,000. With outlets on every other corner in some communities, the greater convenience pharmacy chains offer has enabled them to avoid the free-drug route so far.

But they have their own deep discount programs. CVS, for example, has its Health Savings Pass, which allows consumers to get 90-day supplies of 400 generic drugs for $9.99 after paying an annual $10 enrollment fee. Kroger, Walmart (WMT), Target (TGT) and Kmart have also taken the low-cost route.

Meijer is providing more reasons to drive past Walgreen and CVS and Rite Aid to fill prescriptions -- free and paid -- at its stores. Watch as other retailers follow the unlikely leader yet again.