Costco launches PBM

Costco Health Solutions promoted to small businesses

NEW YORK — Costco has entered the pharmacy benefit management business, according to published reports.

In an article in the January 2013 issue of Costco Connection magazine, the club warehouse retailer is promoting the new PBM, Costco Health Solutions, to small business owners. Pharmaceutical industry consultant Adam Fein noted on his blog, Drug Channels, that Costco was seeking to emulate the tactics already used by CVS Caremark, Walgreens and Walmart to drive prescription growth.

"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," the Costco Connection article quoted assistant VP Chris Pierce, who oversees the program, as saying.

In a note to investors on Thursday, Citi analyst Deborah Weinswig wrote that the retailer was offering Costco Business Prescription Insurance to employers with at least 50 employees who are self-funded, with EnvisionRx believed to be providing the back-end PBM infrastructure. Still, Weinswig wrote that she expects "little traction."

"We expect the Costco PBM offering will gain little traction as the employers at the size targeted by Costco are less likely to be self-funded and also are unlikely to be interested in managing another benefit plan for their employees," Weinswig wrote. "Our initial discussions with industry consultants indicate that Costco will not be successful pursuing the most attractive segments of PBM business — large and mid-sized employers. Costco would need to work with these consultants to go after larger clients as they remain the gatekeepers to this segment of the business."

Still, the Costco Connection article introducing CHS noted that the new PBM offers prescription drugs through Costco's own pharmacies or a network of 64,000 independent pharmacies that have agreed to pre-negotiated prices, and Nippon Paper Industries USA, a 200-employer company in Port Angeles, Wash., had signed on to the program.

"The savings have been phenomenal," the article quoted Nippon Paper USA human resources manager Cathy Price as saying, noting that the company's cost of pharmacy services had been reduced by 43% since it adopted CHS' services. "It's proven very valuable to us in our benefits program. I'd recommend it to anybody."

Comments

- 9:11 AM
rhammerle says

Ms. Weinswig is right. Costco's late coming, "me too" offering fails to provide distinctive services that their small business clients could genuinely use but which are not being offered by the larger, faster, bigger players in this field. If they really wanted to make a distinctive difference in medical cost management, they should consider a turbo charged version of programs similar to those they've done for car buyers or those who take cruises. Ron Hammerle Health Resources, Ltd. Tampa, Florida

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