Free drugs! Companies compete on cheap meds.

LAST JULY, Wal-Mart launched a $4 prescription drug plan, offering a month's supply of about 140 generic medications for the cost of a Happy Meal. According to the company, "The medicines represented are used to treat and manage conditions including allergies, cholesterol, high blood pressure and diabetes. Some antibiotics, antidepressants, antipsychotics and prescription vitamins are also included."

Wal-Mart's competitors quickly responded. Target matched the $4 cost. Struggling retailer Kmart priced a number of generics at $15 for a 90-day supply. A spokesman for the Florida chapter of the left-leaning Public Interest Research Group (PIRG) conceded that such competition is good for the state's seniors. "Whatever their intentions are," he told Florida's Herald Tribune, "if they can somehow offer cheaper prescription drugs and drive others to do the same, that would be great-particularly for the uninsured, who really face a huge obstacle in prescription drug costs."

A year after Wal-Mart initiated the $4 program, Publix, a Florida-based supermarket chain, bested the deal. In August, Publix CEO Charlie Jenkins Jr., with Florida's Republican Gov. Charlie Crist in tow, announced that the company's pharmacies would offer seven common antibiotics, which it says account for more than half of the generic pediatric prescriptions filled at the store, for free. At all of the company's 684 pharmacies, customers can walk out with a 14-day supply of common oral antibiotics such as amoxicillin at no charge and with no requirement to buy other products.

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At Publix's press conference, Crist praised the decision, noting that the private sector's involvement in making drugs affordable to low-income families and the uninsured was "a great trend." Indeed it is. As Business Week recently wrote, the Wal-Mart-initiated price war has "brought transparency to the retail drug arena. Until recently, when a drug's patent expired, pharmacies would charge as much as they liked for the generic version."

In some states, the race to offer ever-cheaper generics is facing entrenched resistance in the form of anti-predatory pricing laws. Wisconsin's Depression-era Unfair Sales Act, for example, mandates a minimum markup on the wholesale price of products, and 12 other states have similar laws against loss leaders.