Costco is moving in on the territory of Express Scripts and CVS Caremark with the launch of Costco Health Solutions, a pharmacy benefits manager offer designed to cut prescription drug costs for small and midsize businesses.
The program, as described in The Costco Connection, will make low price prescription drugs available at the chain's in-warehouse pharmacies as well as 64,000 independent drugstores. Costco claims that its prices are typically between 10 and 15 percent lower than competitive plans.
"The Costco pharmacy adheres to the same Costco philosophy as other areas of our business; we keep a tight rein on expenses, take lower markups and pass discounts and rebates from manufacturers to our members at time of purchase," Chris Pierce, assistant vice president at the chain who oversees Costco Health Solutions, told the in-house publication.
Nippon Paper Industries is one of the early users of Costco's PBM. The 200-employee company claims to have cut pharmacy costs by 43 percent since making the switch from another program.
"The savings have been phenomenal," Cathy Price, human resources manager for Nippon Paper, told The Costco Connection. "It's proven very valuable to us in our benefits program. I'd recommend it to anybody."
Ross Muken, senior managing director at ISI Group LLC, told Dow Jones Newswires that the PBM will prove valuable as a traffic builder for Costco. It could also help attract employees of companies using the PBM program to purchase individual club memberships.
"This is a new and interesting strategy for Costco that fits in with how their business model works," Mr. Muken said.
How effective will Costco Health Solutions prove in attracting business and individual memberships to the warehouse club chain?