Sunday, August 31, 2003

BENTONVILLE, Ark. - The decision by Wal-Mart to enter the on-line diabetic supplies market has others in this business watching closely to see what the possible next move for this retailing giant might be.

Wal-Mart began selling Reli On test strips, meters, insulin and insulin delivery devices in July via the mail-order pharmacy. Although Wal-Mart’s on-line efforts exclude Medicare billing, respect for company’s size and buying power are warranting close observation.

Wal-Mart Spokesperson Cynthia Lin explained the company is tapping into the growing market for people with Type 2 diabetes, which the International Diabetes Federation puts at more than 15 million North Americans.

Effective health management, she said, requires on-going dedication through testing and treatment. “Managing the disease can be costly,” she said, and Wal-Mart’s ability to offer 90-day supplies at discounted prices “helps customers reduce costs.”

The company’s move is viewed by most as not a major threat for the huge mail-order diabetes supply market because they aren’t planning to bill Medicare.

Although neither Wal-Mart nor observers could specify why the retailer isn’t taking on Medicare billing, Mickey Letson, president of Letco Medical, Decatur, Ala., observed it most likely has to do with their reluctance to deal with Medicare’s complicated billing process.

“A large percentage of testing diabetics are Medicare/Medicaid patients,” noted Joe Capper, president of Clearwater, Fla.-based Diabetic Supply of USA.

And the fact Wal-Mart isn’t doing the billing for this segment, “means I don’t think it would have much of an impact,” Capper added. Yet, he said, “you have to respect what they have done. It gets your attention when they get into this niche.”

Capper said if Wal-Mart did actively pursue the Medicare market, there wouldn’t be much competitors could do given the company’s retail dominance. Wal-Mart, with annual sales of $244.5 billion, operates more than 2,879 U.S. stores and supercenters, 520 Sam’s Clubs and 1,275 international units.

Marcus Kruk, vice president of sales at HME Services, Cincinnati, agreed Wal-Mart’s entry into the diabetes supply market - no matter how limited - is worth a look. “Any time a big retailer wants to step into our sandbox, we take notice,” he said.

“I don’t see why Wal-Mart wouldn’t get into Medicare eventually,” Kruk said, “except that they don’t have to.”

He said as long as Wal-Mart limits the scope of its on-line business, other mail-order companies that do bill insurance and Medicare will keep their advantage.

“We make it so seamless for the consumer,” said Kruk. “We ship, bill, do follow-up, educate.” HME