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Published December 03 2006

State law forces exceptions to $4 drug programs

ST. PAUL - With retail giants Target Corp. and Wal-Mart Stores Inc. rolling out programs to sell generic drugs as cheaply as $4 a month, some Minnesota lawmakers want to take a closer look at a Depression-era state law meant to shield small retailers from big chains.

The statute makes it a misdemeanor for retailers to sell merchandise for less than its actual cost, and it's prompted Target and Wal-Mart to carve out some exceptions in their programs, which sell around 300 generic prescription drugs for as little as $4 for a month's supply.

In most states, customers are charged a flat $4 for all the generic drugs included in each retailer's new discount generic drug programs. But in Minnesota and a handful of other states, Target and Wal-Mart are charging more for certain drugs to stay within the law.

Given the push to make medications more affordable, some legislators say Minnesota's law needs a review, though they also express sympathy for the needs of small pharmacies.

"I'd say we need to look at it," said Linda Scheid, DFL-Brooklyn Park, who chairs the Senate's commerce committee. "I'd like to hear kind of a modern rationale for it."

Gov. Tim Pawlenty also thinks it's worth a look.

"We are open to considering a change in the state law," Pawlenty spokesman Brian McClung said.

To stay in compliance with laws in nine states, including Minnesota, Wal-Mart will sell about 55 drugs on its list for $9 per month.

A Target spokeswoman didn't respond to inquiries from the St. Paul Pioneer Press seeking comment. But the newspaper reported Sunday that calls to local pharmacies in the chain suggest the Minneapolis-based retailer will sell about 16 drugs on its list for anywhere from $5 to $20.

"Our goal is to abide by the laws wherever we do business," Kevin Gardner, a Wal-Mart spokesman, told the newspaper. "While we had to add a tier at $9, that's still a savings over what customers were paying before."

Minnesota's statute was one of many written during the Depression to protect small retailers against competition from large chain stores, said William L. Sippel, a lawyer with Oppenheimer Wolff & Donnelly in Minneapolis. Modern courts would look at whether a retailer's low prices could drive competitors out of business and enable the retailer to recoup losses later with higher prices, Sippel said.

Tim Gallagher, president-elect of the Minnesota Pharmacists Association, said small drug stores need such a shield to prevent them from being driven out of rural areas _ something he said would hurt competition in the long run.

That's a concern for Scheid. In the 1960s, she said, her father's St. Louis Park service station quit the oil-change business once big retailers started selling oil for less than he could purchase it from wholesalers.

The Senate's lead Democrat on health care issues, Linda Berglin of Minneapolis, said that while she wouldn't oppose a fresh look at the statute, she also has sympathy for small drug stores.

Gardner said Wal-Mart has no plans to try to change Minnesota's or other state laws that limit the generic drug program.