How might a business overcome ongoing criticism that its employee health insurance plan isn't cutting it? For Bentonville, Ark.-based Wal-Mart the answer is simple: offer $4 prescription drugs for everyone.

Wal-Mart announced in October 2006 that it is rolling out a low-priced generic drug program to more than a dozen states, including Illinois and Florida. The world's largest retailer became the talk of drugstore owners everywhere when it began test-selling a 30-day supply of generic prescription drugs at select pharmacies in Tampa. Chains such as Walgreens and CVS had the most to fear from the move—as these drugstores have a major retail presence in Florida and Illinois—and the companies' shares plunged about 12 percent as a result of the announcement—an indication that investors believe Wal-Mart's heft will cut deeply into the generic drug business.

As is usually the case when Wal-Mart enters a new market, competitors lose and the customer wins. Wal-Mart customers will pay only $4 for generic drugs, whether they have insurance or not. The price reportedly applies to more than100 drugs at various dosages. The development represents a sea change in the price of prescription drugs, which has remained high due to intense government regulation and a resulting lack of exposure to market forces.

Despite its entry into prescription drugs, Wal-Mart is a minor player in the pharmacy business. But analysts believe the company has the potential to challenge drugstore dominance. That perspective gained support from news that Target and Costco are now announcing that they will match Wal-Mart's $4 price on generic drugs in various US states.

For now, it doesn't appear that Wal-Mart threatens to put drugstore chains like Walgreens and CVS out of business. Nevertheless, the competitive pain and stress caused by $4 generic drugs may cause many drugstore owners to double up on their personal aspirin intake.