Why Costco's generic drugs are so cheap

While chains like CVS and Rite-Aid depend on pharmacy profits, the warehouse retailer uses prescriptions to draw traffic.

By Jason Notte Apr 4, 2013 8:35AM

Prescription medicine expenses (copyright Don Farrall, Photodisc, Getty Images)There aren't coupons for prescription drugs, but Costco (COST) is probably wishing it could print up some "$749 off" inserts right about now.


Consumer Reports went shopping at 200 pharmacies across the country for a month's supply of five prescription drugs that just went generic: Actos for diabetes, Lexapro for depression, Singulair for asthma, Plavix for blood thinning, and Lipitor for high cholesterol.


What they found was a $749 difference -- that's 447% -- between the $916 price tag at CVS (CVS) and the $167 that Costco charged for the same five drugs. For generic Lipitor alone CVS charged $150 to Costco's $17. The generic Lexapro found at CVS for $126 could be had at Costco for $7.


Why such a big difference? Because CVS, Rite Aid (RAD) and Walgreen (WAG) draw most of their profits from the pharmacy, while Costco, Sam's Club and other discount stores consider their pharmacies throw-ins that help bulk up foot traffic.


CVS, in particular, also factors in the cost of drive-through windows, automated prescription refill systems, prescription consultation and 24-hour pharmacies that Costco's Monday-Saturday service lacks.


Americans spent an average of $758 per person out of pocket for medication in 2012, according to a recent Consumer Reports poll. Of the 1,130 people surveyed who regularly took prescription drugs -- both insured and uninsured -- 12% spent more than $1,200 last year.


With CVS' direct competitors pressed to offer the same costly amenities, Rite Aid's price for that five generic drug cocktail is a whopping $820. Even with its pharmacies as a second-fiddle throw-in, Target's (TGT) tally came out to a steep $796 -- a full $360 more than Walgreen's $436.


On the whole, Walgreen fared better than not only its biggest health-and-beauty competitors, but even grocery stores like SuperValu (SVU), Safeway (SWY) and Kroger (KR), which charged $658 for all five drugs. In fact, most prescriptions at Walgreen were only $7 more than those offered at Wal-Mart (WMT) ($426). Only Lexapro cost more at Walgreen ($105) than at the big-box retailer ($84).

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Apr 4, 2013 1:29PM
Costco pharmacy is great. Even though I have insurance, there have been times when I have not bothered to have them submit it under insurance, as the cash price is cheaper than my co-pay would be.

Costco is truly an all American store run for the betterment of the buying public with NO strings attached.

A leader in humanity and cost sharing .

Apr 4, 2013 1:28PM
If I lived near a Costco I'd use it in a heart beat. Good quality, over all good prices, broad range of items for sale. Easily worth the member fee.
Apr 4, 2013 3:57PM
By the way, the pharmacy is one of the two places at Costco that you can use without having a membership, that and the walk up food window outside. Good deals even for non-members.
Apr 4, 2013 7:43PM

Our country is full of greedy pigs that gouge you every chance they get.  Costco has made the decision not to do that and they should be applauded for it, no matter what their motivation.


CVS stores have been going up on every other street corner in my area putting all the small local drug stores out of business and I wouldn't shop at one if you paid me.  They are just another huge monopoly that is financed by some billionaire conglomerate designed to eliminate the competition.


Another day in the free enterprise system that kills competition through buyouts and mergers. The employees never win and consumers pay the ultimate price eventually.

Apr 4, 2013 3:58PM
A poor excuse is better than no excuse. CVS, Rite -Aid, Walgreen, etc are now selling everything except fishing license. Their pharmacy prices are more because they want to wring every dollar they can.
Apr 4, 2013 8:51PM
Several years ago I lost my job along with my insurance. I was able to keep the insurance up for an additional 18 months, at a pretty huge cost. When I lost that I thought I was done for, as I was on MANY prescriptions. Someone told me about Costco and off I went. After explaining my situation to the pharmacist she gave me some paperwork to fill out, stating my income etc. Next I was given a huge discount by the pharmaceutical manufacturers because of my financial and health situation.  The pharmacist recommended a couple of generics to replace name brands my Doc had me on. At the end of the day, my outlay was CONSIDERABLY less at Costco than my insurance premium and drugs combined had been for 18 months. I can't say enough good things about Costco. THAT folks is how you GAIN customers and KEEP customers. They quite litterally saved my life with their HELP with my problems. The other pharmacies offered me ZIP.
Apr 4, 2013 12:45PM
So Walgreens' little rewards program doesn't help a whole lot? Don't shop at drugstores.
Apr 4, 2013 3:31PM
I take 3 prescription drugs that I am able to get in generic form.  At Wal Mart I get a 90 day supply and the cost is $10.00 for each one.  If I use my BC/BS prescription plan the cost would be $87.50.  Go figure.

Just saying...
Apr 4, 2013 8:47PM
100% agreement...Costco is the ONLY place to go for prescriptions.  Of importance to most folks, you do NOT have to be a member to have your prescriptions filled.  When you enter a store, simply tell the person looking for membership cards, you are going to the pharmacy.  If you are a member, you will even get a discount on prescriptions, but it is not necessary.  We gave up prescription d medicare in favor of Costco and have not regretted , so far, our decision.  The staff are extremly helpful, courteous and professional.  And how often does one need a pharmacy on Sunday, or a drive-thru?  These people know their busines and it shows.
Apr 4, 2013 7:39PM
There are other pharmacies that offer prices like costco and sam's. I didn't have insurance for a year, but needed ongoing prescriptions. I called around. One medication was $250 at target, $180 at walmart, but only $20 at a mom and pop pharmacy. So even if you don't have a costco membership or have a costco near you, you can shop around and still get low prices.
Apr 4, 2013 2:54PM

Canubellieveit, there isn't a drug store anywhere that doesn't say 20 to 30 minute wait. Your so called owner opreator store does the same thing. But if your so damn rich that you don't mind paying more for your drugs keep going to him, me I'll save the 750% and go to the big store.


Apr 4, 2013 2:49PM
I work as a Pharmacy consultant for the small independent pharmacy's . I can tell you that in the last 5 yrs the price of generics has gone up substantially .The insurance companies do not increase their reimbursement and these MOM and POP family pharmacies are taking a hit. The walgreens and Wal-Mart's not so much. These pharmacist know all their consumers by name and care about the patients health. You do not get that service in the Food & chain stores. Support your hometown independent , locally owned pharmacies...
Apr 4, 2013 7:37PM
That is exactly why I have a Costco membership...
Apr 4, 2013 7:54PM
Cool!  This means I may be able to buy any prescription medicine I may need at home and stop buying from abroad.  That will save me on shipping costs!

Somewhere there's a racket on this medicine.  Only in America do you they charge a set of pills that cost probably 10.00 to produce and turn around and sell it for $800.

Examining and dealing with patents and the supply chain was gravely overlooked when congress voted the "Affordable" care act.  One of a few other reasons I think the healthcare bill may fail.  
Apr 4, 2013 7:37PM
Love Costco.  Dislike Wally World. Target is way better than Wally World. 
Apr 4, 2013 7:37PM
I work in a small hometown Kroger pharmacy . We offer 3 months supply on inexpensive generic medications. That is not the reason we are one of the busiest pharmacies in NM. It's because we truly care about our customers, make sure their allergies are double checked and medication interactions are documented. We also have a close relationship with their physicians  so we can prevent any errors. Most of all, we are compassionate and know our customers by name. There are several big chain pharmacies near by.  Our customers come back because we care.
Apr 4, 2013 7:38PM
My cost savings for Pharmacy alone is worth the membership. I lose money on bulk items....Especially cookies and their marinated steak. Fuel is a bonus!!!
Apr 4, 2013 10:54PM
In reply to the wait time, please understand that first of all, there may be prescriptions ahead of yours. Also, at the time you hand in your prescription, it must be visually inspected, scanned into data entry, preverified by the pharmacist, pulled from the shelf, counted and double counted if it is a controlled substance, post verified by the pharmacist and visually checked. It is then ready to be sold to the customer. If there is an insurance problem, this of course slows down the entire process.  It is not as easy as " slapping on a label" as some people think.
Apr 4, 2013 2:28PM

You don't hae to be a member to se he RX.Mailng i free also.


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