How a National Retailer Turned Their Drug Spend Problem into a Solution for Employers Nationwide

By Allison Binning

Few employers are able to tackle escalating drug spend year over year in a meaningful way, but then again, few employers bare the name Costco. Certainly, we all know Costco for their incredible prices, excellent free samples, and rows of monster-sized dry goods, and most know that Costco has a pharmacy within the industry-leading warehouse retailer. That pharmacy front is also a gateway to help employers contain savings within their own health plan. But, believe it or not, the move to the PBM space didn’t begin with the general public. It began when the retailer was evaluating their own total health plan spend and looking for solutions to contain costs for their 300,000 plus employees.


How it all began.

One big shift happening within the PBM spend is a move toward transparency. Not long ago, employers didn’t have access to the data driving this monstrous spend on the health plan.   And yet, claims data is essential for effective and transparent health care plan management. When Costco acknowledged there was not a solution in the market that effectively served their members while being cost-effective, they got to work solving their problem by building their own PBM. Today, through Costco Health Solutions, the company can directly negotiate with drug manufacturers to get lower drug prices, rather than going through a PBM middleman that might not be working in their favor. They wanted to provide services to give their employees the most cost-effective treatment options. And in building it for themselves, they realized it was also another solution that could be brought to the employer market. In 2017, the pharmacy department worked alongside human resources to create the offering they wanted and needed.


Raising the PBM bar.

When working with other employers, Costco Health Solutions also customizes pharmacy benefit plans to match employee needs and business objectives. When discussing their approach to the employer market, Jared Picore, Regional Sales Manager explains, Costco Health Solutions works with employers to design custom pharmacy benefit plans that meet their unique needs. The company offers plan design and implementation services, as well as ongoing support and reporting.”


To Picore, “Transparency is the light that will bring PBM conflicts of interest with employers to light.” Costco Health Solutions is committed to transparency by disclosing fees and markup rates, along with providing 100% of all rebates from drug manufacturers to our clients. We are contractually guaranteed to take no fees from clients other than the administrative fee. Because our PBM is not a profit center, we can align our incentives with the clients." 


Employers do not have to incorporate Costco membership in order for their employees to leverage the Costco Health Plan. 


From amazing samples and an amazing ethos to an amazing PBM experience…naturally.

Costco Health Solutions, as a subsidiary to Costco Wholesale, is committed to providing high-quality products at low prices while keeping their commitment to ethical business practices. They desire a healthy work environment and maintaining employee welfare, providing all plans in their coalition with the same network discounts, rebates, and flexibility. From self-funded employers with 50 employees to those that have over 400,000, Costco Health Solutions is committed to their ethos of value and responsible business practices for all goals and needs. From the wholesale side to the PBM arena, that ethos includes four core elements that should matter just as much for a Costco shopper as it is when employers are seeking a PBM partner.

They include:

  1. Focus on customer value: Costco's primary focus is on providing value to its members. The company achieves this by offering high-quality products at low prices, and by limiting its markup on merchandise to keep costs down.

  2. Ethical and responsible business practices: Costco places a strong emphasis on ethical and responsible business practices. The company is committed to treating its employees, customers, and suppliers with respect, and to operating in a socially and environmentally responsible manner.

  3. Employee welfare: Costco is known for treating its employees well, offering competitive wages and benefits, and providing a positive work environment. The company has a low employee turnover rate and has been recognized for its commitment to employee welfare.

  4. Limited product selection: Unlike other retailers that offer a vast array of products, Costco focuses on a limited selection of high-quality products that have been carefully curated to offer the best value to its members.



To learn more about Costco Health Solutions, check out The Granite List today.

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