Ever hear of a "loss leader"?
A loss leader is an item a store sells at a loss to draw people into the store. The premise is that by leading them into the store, the loss will be more than made up by spending elsewhere.
Milk's a pretty common loss leader for pharmacies where it's often sold cheaper than in supermarkets. Of course most everything else in pharmacies is marked up through the roof, but still, that milk is cheap and so often that's where I'll go to get it.
Milk's a good loss leader because most households buy it, it has an expiry date so people won't stockpile it, and you can place it in the back corner of the store so people need to walk through other aisles to find it and in so doing be more likely to grab other, higher priced items.
Items that would make bad loss leaders? Things not enough people want or need as it simply wouldn't draw in enough business to recoup the losses.
So what does that say about Meijer's latest plan to give away free prescription diabetes medications?
Yup, Meijer's, with 191 stores across 5 American States has announced that Metformin, the most commonly prescribed diabetic medication, a drug that retails there for between $14 and $42 monthly, will be dispensed freely to those with prescriptions.
The medical community there is thrilled, and so too I'm sure are uninsured patients.
Me? I don't find it as thrilling. Sure it's wonderful that low income folks will no longer have an issue affording their medication but what does it say about the state of the nation that diabetes medications can be successful loss leaders, and not just at discounted prices but at 100% markdowns?
It says that type 2 diabetes, weight-related diabetes, is now so prevalent that actually giving away the medication for free is a cost effective strategy for improving store sales.
Given the exponential rise in the risk of obesity with rising weight, diabetes rates are set to soar with some predictions suggesting rates are set to more than double by 2050.
That's a lot of free Metformin.