Federal Drug Pricing Explains Walmart’s Health and Wellness Decline. Two More Rounds Are Scheduled.

Walmart U.S. health and wellness comped down low single digits in the second quarter of fiscal 2027. Walmart attributes roughly 900 basis points of negative impact inside the category to deflation tied to maximum fair price regulation, and roughly 125 basis points of headwind to total Walmart U.S. comparable sales from pharmacy deflation and brand-to-generic transfers related to the same regulation. The earnings release puts the net health and wellness drag on segment comp at 80 basis points.

In the first quarter of fiscal 2026, the same category comped up high teens, driven by script growth and a higher mix of branded versus generic sales.

Over-the-Counter Sits Inside the Category That Just Comped Down

Before drawing any conclusion from that negative number, note what it contains. Walmart’s 10-K defines health and wellness at Walmart U.S. as pharmacy, over-the-counter drugs and other medical products, and optical services. Over-the-counter is inside the reporting line.

In the same disclosure that shows the category comping down, Walmart reports strength in over-the-counter sales driven by wellness and nutrition products. Both statements are true at once. The negative figure is prescription deflation swamping OTC growth inside a shared reporting unit.

A supplier who sells vitamins, supplements, wellness, or nutrition into Walmart and reads that category comp as a verdict on their business is reading a number that is mostly about drug pricing policy. Everything below explains why, and why the direction is set through at least 2028.

The GLP-1 Tailwind Halved Because Prices Fell, Not Because Scripts Did

Walmart discloses that fiscal 2027 comps carry roughly a 50 basis point tailwind from GLP-1 medications, against roughly 100 basis points in each of the two prior fiscal years. The company explains the halving directly: script growth was more than offset by price and mix headwinds.

A tailwind that halves because fewer people fill prescriptions is a demand problem. A tailwind that halves because the same prescriptions generate less revenue is a pricing problem, and pricing in this category is now set by federal action.

Walmart also discloses that fiscal 2027 year to date total comp reflects a net swing of roughly 200 basis points on average against the trailing two-year pace, attributable to health and wellness.

Walmart Names Both Pricing Mechanisms as Risks in Its 10-K

Among the risks to its retail pharmacy operations, Walmart’s fiscal 2026 annual report lists increased governmental focus on reducing drug prices, naming most favored nation pricing policies, maximum fair price negotiations, and direct-to-consumer pharmacy delivery models in a single clause. The filing also names reductions in third-party reimbursement rates, changes in payer mix, and changes in the scope of Medicare Part D.

The same disclosure states that a large majority of retail pharmacy net sales come from prescriptions paid through contractual relationships with third-party payers including governmental agencies and pharmacy benefit managers.

The risk factor closes by warning that these factors may adversely affect pharmacy volumes, cost of sales, net sales and gross margin, “or result in the loss of cross-store or cross-club selling opportunities.” That last phrase is Walmart telling investors that pharmacy disruption reaches the aisles around the counter, which is the part of this story that belongs to suppliers.

Ten Drugs Produced That Result. Fifteen More Take Effect January 1.

The regulation behind the deflation is the Medicare Drug Price Negotiation Program created by the Inflation Reduction Act, under which CMS negotiates prices, called maximum fair prices, for high-expenditure Part D drugs without generic competition.

The first cycle covered ten drugs, effective January 1, 2026. CMS lists them as Eliquis, Enbrel, Entresto, Farxiga, Imbruvica, Januvia, Jardiance, NovoLog and Fiasp, Stelara, and Xarelto. Seven of the ten treat diabetes or cardiovascular conditions, which is to say seven of the ten are chronic maintenance medications dispensed month after month at high volume. That is the population that moves a retail pharmacy comp, and it produced Walmart’s 900 basis points.

The second cycle covers fifteen drugs, and CMS confirms those prices take effect January 1, 2027, inside Walmart’s fiscal fourth quarter.

The largest is semaglutide, sold as Ozempic, Rybelsus, and Wegovy. CMS puts the negotiated price at $274 for a 30-day supply against a 2024 list price of $959, a 71 percent reduction from list, and identifies it as the selected drug with the highest total gross covered prescription drug costs under Part D in 2024, at $15.2 billion across about 2.3 million enrollees.

Several others are high-volume chronic care medications. CMS puts Trelegy Ellipta at $175 against $654 with about 1.3 million Part D users, Linzess at $136 against $539 with about 632,000 users, and Breo Ellipta at $67 against $397 with about 626,000 users. Two additional type 2 diabetes drugs, Tradjenta and Janumet, come down 84 and 85 percent from list.

Across all fifteen, CMS estimates net savings of $12 billion against 2024 spending, or about 44 percent, falling to roughly $8.5 billion and 36 percent when Coverage Gap Discount Program spending is included.

One qualification belongs here. Maximum fair price applies to Medicare Part D, and a retail pharmacy’s book includes cash, commercial, and Medicaid business the regulation does not touch. Walmart has not disclosed its payer mix, and no one should model this by applying CMS percentages to Walmart’s pharmacy sales. What Walmart has disclosed is the outcome of the first cycle at roughly 900 basis points inside the category, and John David Rainey guided the full-year fiscal 2027 impact at roughly 100 basis points on the February earnings call. Those are the empirical anchors.

A Second Federal Program Started July 1, and It Adds Prescriptions Instead of Removing Dollars

The deflation is only half of what Washington set in motion, and the other half started inside the quarter Walmart just reported.

CMS launched the Medicare GLP-1 Bridge on July 1, 2026, a time-limited demonstration running through December 31, 2027, under which eligible Medicare Part D beneficiaries can obtain certain GLP-1 medications for weight loss at a $50 monthly copay. NPR reports the covered products as the pill and injectable formulations of Wegovy, the KwikPen formulation of Zepbound, and the Foundayo pill.

The significance is the population. Federal law has long barred Medicare from covering GLP-1s prescribed solely for obesity, so beneficiaries who wanted them for weight management paid cash or went without.

The economics behind the $50 copay come from agreements the administration announced with Novo Nordisk and Eli Lilly in November 2025, under which Medicare pays a net price reported at $245 per monthly supply. A broader demonstration called the BALANCE model, described by KFF, opened to state Medicaid programs in May 2026. Its Medicare Part D component had been scheduled for January 2027, but CMS postponed it indefinitely in April 2026 and extended the Bridge by a year instead.

Line the dates against Walmart’s fiscal calendar. One month of the Bridge sits inside the second quarter just reported. The third quarter, ending October 30, is the first full quarter carrying it. The fourth quarter carries both the Bridge and the semaglutide maximum fair price, one program adding covered prescriptions while the other cuts the revenue each prescription produces.

Walmart Is Filling More Prescriptions and Booking Fewer Dollars for Them

Walmart reports that pharmacy script counts grew mid single digits in the second quarter with ongoing market share gains. That figure sits in the same disclosure as the negative category comp.

Nothing in the disclosures establishes whether script growth is accelerating or slowing. What they do establish is that prescription volume grew and share was gained in a quarter the category comped down. The Bridge should support script counts going forward, because it converts a cash-pay or no-purchase decision into a covered monthly fill.

What OTC, Vitamin, and Nutrition Suppliers Should Do With This

Almost no supplier reading this sells prescription drugs. A great many sell into and around health and wellness, and the category comp is the wrong instrument for judging their business.

A supplier seeing that number has every reason to conclude traffic has weakened and the prudent move is to hold back on innovation, promotional investment, or a new item push. Walmart’s disclosures say the opposite about traffic. Script counts are up mid single digits and Walmart is gaining pharmacy share, which means the pharmacy counter is pulling customers into stores in the same period the reported comp went negative. A Medicare beneficiary newly filling a monthly GLP-1 at Walmart under the Bridge represents a recurring monthly trip that did not exist in fiscal 2026.

Build planning off script counts and traffic instead of category comp. Where a merchant frames a category conversation around health and wellness performance, ask what portion of the decline is maximum fair price deflation, because that portion is arithmetic and will not respond to anything a supplier does about cost, promotion, or assortment.

Walmart’s own risk disclosure points at the opportunity. A retailer that has told investors it is exposed to the loss of cross-store selling opportunities from pharmacy pressure has a documented reason to listen to suppliers who can grow the basket attached to a pharmacy trip.

Sam’s Club Shows the Same Pattern at Smaller Scale

Sam’s Club U.S. health and wellness also comped down low single digits. Walmart attributes roughly 600 basis points of negative impact inside the category to maximum fair price deflation, against roughly 900 at Walmart U.S., and puts the drag on total Sam’s comp at roughly 40 basis points against 125. Those two ratios are not the same, and Walmart has not disclosed the category share behind either, so the reason for the smaller impact is not established in the filings.

Walmart describes softness in pharmacy at Sam’s partially offset by strength in over-the-counter, the same composition as Walmart U.S. The direction is identical across both banners, which matters for any supplier selling both who might otherwise read the divergence in reported numbers as a banner-specific performance problem.

The Calendar Extends to 2028

The second cycle is not the end of it. CMS announced fifteen more selected drugs on January 27 of this year, the first cycle to include drugs payable under Medicare Part B, and confirmed on March 13 that every manufacturer involved is participating. Those prices take effect January 1, 2028.

Each cycle stacks rather than replacing the last, since prices from earlier cycles continue and adjust annually by the Consumer Price Index. For a supplier building a fiscal 2028 or fiscal 2029 plan, health and wellness at Walmart carries a known, recurring, non-market deflationary input on each of the next two January 1 dates, layered on prices already in force.

The Bridge runs the other way and expires December 31, 2027, at which point the volume it created either transfers into the BALANCE model or does not.

Walmart’s third quarter comparable sales period ends October 30 and will be the first full quarter carrying the Bridge. The category comp will almost certainly still read poorly. Script count is the figure to read alongside it, and Walmart has disclosed that number every quarter.

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