7 Areas Where Pharmacy Services Can Be A Convener For Change

Rising medical and drug costs demand innovative thinking and collaborative action. Pharmacy services, once narrowly seen as a transactional cost center, can serve as a convening force across industry to improve outcomes, reduce costs, and enhance the patient's experience across care settings.

To be sure, drug spending is a major concern, with gross expenditures in 2023 estimated to be about $1 trillion. List prices are projected to rise 6% to 9% over the next five years, surpassing the anticipated 5% annual rise in overall medical spending. It’s important to recognize that these spending increases don’t happen in a vacuum. Pharmacy services are expanding beyond dispensing — playing critical roles in chronic disease management, population health, and care access. The segment is also undergoing a significant realignment driven by consolidation and vertical integration.

In this environment, pharmacy can no longer be treated as a siloed function. It needs to be a strategic lever — one that influences cost, quality, outcomes, and the patient experience. For health systems, payers, and innovators alike, organizations that elevate pharmacy to the strategy table will be best positioned for sustainable performance.

Exhibit 1 : Breakdown of estimated drug spending by channel and expenditure retained by stakeholders

$USD Billion

Notes: Total gross spend refers to the total prescription drug-related expenditure by all third-party payer and beneficiaries in 2023, including product reimbursement and service payments, before manufacturer rebates are subtracted. Expenditure retained refers to the subset of total gross spend logged as revenue by each stakeholder, after all product reimbursement and service fee transactions are settled. For payers, manufacturer rebates passed through are considered ‘expenditure retained’ because some public and private payer may not recognize them as lowering net pharmacy expenditure directly, but rather re-purpose the rebate amount to sponsor other healthcare programs such as behavioral health programs. For manufacturers, expenditure retained refers to total product payments minus rebates and service fees to all other intermediaries. For intermediaries, expenditure retained refers to the total of product payment received minus product acquisition cost, plus total service fee gained minus total service fee outgoings.

Example market forces driving change along the pharmacy value chain

Manufacturers, pharmacy benefit managers (PBMs), and providers are vying to capture a larger share of profits. Other dynamics at play include retail and grocer-run pharmacies experiencing margin pressures, leading to hard decisions on whether to reinforce their offerings or reduce exposure. Additionally, there’s been a proliferation of new players entering the market, ranging from digital-first solutions to direct-to-consumer cost-plus retailers. Greater use of specialty drugs and expansion of pharmacy-related services like infusion therapy are also reorienting the market. These factors, among others, will continue to shake up the healthcare landscape for years to come.

Exhibit 2: Creating and capturing value across healthcare

How stakeholders can act as convening forces

How stakeholders respond to these trends depends on their role in the market. Each will have a nuanced approach. Still, we believe there are opportunities for greater collaboration across the industry. Since consumers interact with pharmacy services more frequently than any other part of the healthcare system, finding solutions to collectively reshape the sector is critical.

1. Manufacturers can play a starring role in collaborating across sectors: The value chain starts with manufacturers, but they have a larger role to play than developing new branded and generic drugs. By forming strategic partnerships with wholesalers and PBMs, manufacturers can work to streamline distribution processes and reduce costs. They can also improve relationships with providers to provide more holistic solutions. This requires turning key account managers into true partners with the health system clients. There will also be a need to bolster patient education and outreach as some manufacturers venture into direct-to-consumer sales.

2. PBMs can navigate the disruption while continue to lead the way on business model innovation: Calls for legislative and regulatory action are intensifying as the cost of medications rise and access to drugs contracts. Whether policy changes come to fruition is an open question, but disruption is headed for the PBM business model regardless. Specialty pharmacy and administrative fees are replacing spreads and rebates as key profit drivers. PBMs are also capturing more revenue through their own group purchasing organizations, which the big three — CVS Caremark, Express Scripts, and Optum Rx — launched over the past five years. Among vertically integrated PBMs, there’s a push for disaggregation and at the same time better integration of services across the healthcare continuum, in areas such as hospital offerings and home health services. Mid-tier full-service PBMs are driving increased transparency but must achieve scale and develop more comprehensive solutions. Growth could be spurred by deeper partnerships with manufacturers and digital players to improve customer engagement and operational efficiency.

3. Health Plans can push for holistic approaches to population health management and affordability: Better integrating PBM programs with in-house capabilities is one way insurers can reimagine their pharmacy services. Doing so will enable them to deliver more innovative solutions to plan sponsors and members to expand access, improve quality while sustainably managing the drug spend. Regional payors should also create tailored solutions that address specific needs of their populations and boost medication adherence, which will drive improved health outcomes and cost efficiencies. There’s also a need to bolster specialty pharmaceutical and biosimilar offerings. Blues plans can benefit from sharing best practices and collaborating with each other to scale innovation.

4. Health Systems can strengthen supply chain and expand pharmacy capabilities: Health systems must continue to ensure the appropriate and compliant utilization of the 340B drug pricing program, recognizing its critical role in supporting patient access while navigating increasing regulatory scrutiny. In this context, maintaining an effective supply chain and operational excellence is non-negotiable to safeguard program integrity and financial sustainability. Beyond compliance, health systems should proactively pursue strategic growth by expanding specialty pharmacy and in-home care solutions tailored to their patient populations. Additionally, health systems should evaluate the feasibility of internalizing select PBM functions to enhance operational efficiency, strengthen cost control, and reduce reliance on external intermediaries. Together, these actions position health systems to unlock incremental value and advance integrated, patient-centered care.

5. Retail Pharmacies can reconsider their growth strategy in light of competition: As competitive pressure increases, retail chains should conduct a thorough analysis of their market positions. They need to identify the potential for growth opportunities and create more efficiency in such areas as drug procurement, inventory optimization, and data analytics for forecasting. Creating a more holistic health environment by expanding patient adherence solutions and integrating pharmacy services with broader health offerings is another avenue for retail pharmacies to enhance patient access to care and improve overall health outcomes.

6. Specialty pharmacies can bolster patient engagement: Like retail, specialty pharmacies are taking on a larger role in the healthcare ecosystem — a role that will expand rapidly as more high-cost, complex therapies enter the market. They are evolving from dispensing drugs to engaging in more patient education and offering such services as medication adherence, one-on-one counseling, financial assistance, and patient monitoring. Specialty pharmacies can bolster those efforts by collaborating up and down the value chain, especially with PBMs and providers.

7. Wholesalers can evolve distribution models and embrace value-added services: To capitalize on market tailwinds, wholesalers must strategically pivot their distribution focus toward specialty pharmaceuticals, which demand more complex handling, cold chain logistics, and patient-centric services. This shift creates opportunities to offer value-added services such as clinical support, adherence programs, and integrated data solutions that enhance provider and patient outcomes while differentiating their offerings. Strengthening partnerships and leveraging vertical integration with providers and other stakeholders along the value chain will amplify market influence and operational resilience. Finally, accelerating digital transformation through AI, automation, and advanced analytics will be essential to improving supply chain efficiency, accuracy, and security, enabling wholesalers to respond nimbly to market dynamics and regulatory requirements.

Making pharmacy services a strategic priority

Gaining a better understanding of pharmacy services and the ripple effect across the industry is critical for healthcare executives. Navigating the complex relationship across various sectors requires a comprehensive strategy that addresses everything from the rising costs of specialty drugs, engaging with ecosystem stakeholders, and staying ahead of legislative and regulatory changes. We look forward to digging deeper into specific trends and highlighting key shifts in future articles.

Authors

Alok Dalal,
Zhe Yu, and
Irene Wei