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McKesson HBOC

(MCK) - Get McKesson Corporation Report

said Thursday it has signed a four-year pharmacy supply agreement with


(COST) - Get Costco Wholesale Corporation Report


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The contract calls for McKesson, a supply management and health care information company, to serve as the main supplier for Costco's retail pharmacies and its online pharmacy. McKesson will also provide the membership warehouse company with automation technology for its retail pharmacies.

The deal, a renewal of a previous arrangement, is expected to generate $2.2 billion in revenue overall and produce $600 million in incremental revenue. Costco said the contract extension is a reflection of its growth and the expected increased volume it anticipates from 80 new stores and the online pharmacy it launched last year.

Shares of McKesson slipped slightly, falling 84 cents, or 2.5%, to $33.46 in recent

New York Stock Exchange

trading. Costco was up $1.94 cents, or 5.6%, to $36.38 on the