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From: ms.smartest.person12/31/2006 2:48:31 PM
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Say Good-Bye to $4 Prescriptions at Costco
Costco Executives Say They Lost Money and Announced the End of the Program

By Kari Hamanaka

Costco officials announced they will stop the $4 drug prescription plan at all Costco stores saying that the company had lost money as a result of the program.

The $4 program filled prescriptions for a 30-day supply of selected medications for only a $4 cost to consumers. Many drug stores and other retailers attempted to mimic the $4 prescription program from Wal-Mart, the first company to implement the pricing plan.

Instead of the $4 deal, Costco will offer its customers 100 pills for $10 which amounts to a couple cents more in expense per pill as opposed to the $4 prescription plan.

When Wal-Mart first announced plans to charge $4 on prescription drugs in September, many analysts suggested that Wal-Mart would be doing major damage to the prescription drug sales of other retailers, but so far stores such as CVS have said the program has not really affected them adversely.

According to officials at Costco, the cost of pharmacists at Costco, the bottle and maintaining records did not amount to $4, which is why the company ended up losing money with the plan.

Target, along with Costco, was one of the Wal-Mart competitors that attempted to match the program. Target's $4 program is still continuing, but with Costco dropping out of the race one wonders whether copying someone else's marketing plan is really the best way to go. It was not obviously the best way for Costco.

The company realized that it will be losing some of its $4 customers to Wal-Mart or Target who are not able or willing to pay more than $4 for their prescription, but the hope is that the $10 for 100 pills incentive will be enough to keep customers coming back to the Costco pharmacy.

While many said that all other retailers would have to follow suit with Wal-Mart's $4 prescription program in order to survive, that is not necessarily true or even a wise business decision.

It is true that no one may be able to beat Wal-Mart's prices, but at the same time there are people who choose not to shop at Wal-Mart for all sorts of reasons and instead, pay slightly higher prices to shop at other discount, drug or grocery stores for what they need.

Too many stores and industry analysts tend to think that all businesses in the same category as Wal-Mart should be following in the giant company's footsteps every time it makes steep price cuts. Other businesses should not be doing that because Wal-Mart is too big to compete with. This statement is not meant to be cynical, but it is meant to be realistic in terms of how some of these stores do business. Costco cutting its prices to mimic Wal-Mart doesn't make sense because they are two different companies.

Instead of simply matching competitors' prices, stores should just focus on factors that are unique to that store and that brand. While people do like to bargain shop, there are others who are willing to pay slightly higher prices if the store is smaller, easier to navigate or sales associates are more accessible to the shoppers.

Perhaps, if Costco had realized this before following suit with the $4 prescriptions, the company may have saved some money.

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