Drugmakers beware, Costco now in pharmacy benefits

Tools
Costco Wholesale--courtesy of Costco

In the evolving drug payer world, pharmacy benefit managers (PBM) are commanding a bigger role. Now drug companies have a new and interesting PBM with which to contend--Costco.

The discounter has started its own PBM, with the idea of offering services to small and medium-sized companies near its 448 warehouse stores. That way it expects to pick up new memberships and drive traffic, analysts tell The Wall Street Journal. Costco declined to comment to the newspaper but disclosed the new business in an article in its own magazine. That piece says it has created a network of 64,000 independent pharmacies that agreed to prenegotiated prices on drugs.

The PBM business is dominated by Express Scripts Holding ($ESRX) and CVS Caremark ($CVS). For some drugmakers with few products, PBMs can play a big role when they decide to cover, or decline to cover, the cost of certain drugs for members. Express Scripts' recent decision to pay for Vivus' ($VVUS) weight-loss drug Qsymia, which has suffered from lagging uptake, was seen as a boost to that product.

On the flip side, in the past year the CVS Caremark PBM expanded the list of drugs it refuses to cover to more than four dozen. The list includes meds like Allergan's ($AGN) glaucoma drug Lumigan, Pfizer's ($PFE) human growth hormone Genotropin and diabetes treatment Onglyza from Bristol-Myers Squibb ($BMY) and AstraZeneca ($AZN). Some of the drugs were selected because they come with drugmaker coupon cards, which encourage patients to stick with higher-priced branded drugs when generics--and lower-cost brands--are available.

ISI Group tells The Wall Street Journal the entry of Costco into the market is "more noise than market moving news," but still an indication of a more competitive market. Known as a shrewd business, it adds another factor for drugmakers to consider.

- here's the Wall Street Journal story (sub. req.)

Related Articles:
Express Scripts will cover weight-loss med Qsymia
CVS shucking more drugs from its coverage list
CVS takes aim at co-pay cards by blocking drug coverage