U.S. Pharmacy Benefit Management Market (By Business Model: Standalone PBM, Health Insurance Providers; By Service: Specialty Pharmacy, Retail Pharmacy; By End-user: Commercial, Federal) - Industry Analysis, Size, Share, Growth, Trends, and Forecast 2024-2033

The U.S. pharmacy benefit management market size was estimated at USD 490.29 billion in 2023 and is expected to be worth around USD 853.50 billion by 2033, poised to grow at a compound annual growth rate (CAGR) of 5.7% during the forecast period 2024 to 2033.

U.S. Pharmacy Benefit Management Market Key Takeaways

• By Business Model, the standalone PBM segment dominated the market with the largest market share of 60% in 2023.
• By Business Model, the healthcare insurance provider segment is expected to generate significant revenue throughout the forecast period.
• By Services, the specialty pharmacies segment dominated the market in 2022.
• By Services, the retail services segment is expected to witness significant growth during the predicted timeframe.
• By End-user, the commercial segment projected the highest market growth in 2022.
• By End-user, the federal segment is expected to dominate the market during the anticipated time.

U.S. Pharmacy Benefit Management Market Growth Factors

The rise in healthcare spending has had a significant impact on the market's growth. Aside from that, the rising prevalence of chronic illnesses and a growing tendency for vertical integration within pharmaceutical distribution networks have boosted the industry in the country.

Pharmacy benefit managers serve as liaisons between insurance companies and pharmaceutical producers. According to the National Association of Insurance Commissioners, there are around 66 PBM businesses operating in the United States, handling the pharmacy benefits of over 266 million Americans. PBM (pharmacy benefit management) services are in high demand as the number of insurance providers having in-house pharmaceutical benefit groups to manage the insured population grows. PBM systems reduce total costs by integrating health plan consumers into larger networks that allow for negotiations and discounts.

Vertical integration is driving market growth, particularly in the aftermath of CVS-Aetna and Cigna-Express Scripts mergers. The supply chain dynamics are expected to shift significantly in the next years, particularly following these mergers. Partnerships between PBM organizations and health insurance companies are expected to boost market growth and PBMs' participation in decision-making. Such market partnerships would increase the price and personalization of health insurance policies, as well as provide more options by aligning with healthcare providers.

The majority of pharmaceuticals on the market have identical mechanisms of action, resulting in minor differences between APIs, increasing the price sensitivity of these medications. PBMs release prescription formularies that include all drugs covered by their benefit plans, and manufacturers are willing to provide discounts. Manufacturers who include their medications on the PBM formulary list considerably compensate PBMs. Prior-authorization rules give PBMs more power over prescribing decisions, potentially allowing them to interrupt patient treatments.

U.S. Pharmacy Benefit Management Market Report Scope

U.S. Pharmacy Benefit Management Market Dynamics:

Driver:

Increasing medication accessibility

Access to medical services in the United States is facilitated by making sure that the medications are both affordable and safe. Patients who receive individualized care may also feel secure enough to take their prescribed drugs without being concerned about the expense or course of their care. In keeping with a tailored strategy, PBMs can work with companies to offer insightful counsel on efficient health plans. The objective of this activity is to deliver the greatest care at the most affordable cost. These groups can also seek approaches to increase the availability of specialist medications for individuals who require them.

The increasing accessibility to medication can drive the growth of the market by expanding the customer base and increasing the volume of prescriptions processes. This could lead to greater demand for PBM services as more individuals gain access to healthcare and pharmaceuticals. Additionally, a larger patient population could lead to increased negotiations with drug manufacturers for better pricing, which PBMs facilitate, further contributing to the market’s growth.

Restraint:

Lack of transparency

Due to the difficulties with pharmaceutical benefit managers, there is a discussion on the transparency of PBM activities. PBMs assert that they are in a good position to save plans and customers money, but because their business practices are opaque, they are frequently able to utilize their clout to increase their profits at the expense of the customer. This has prompted policymakers to consider changing the rebate system by requiring PBMs to pass along more rebate savings or increasing transparency. The lack of transparency in the market acts as a restraint by making it difficult for stakeholders, such as patients, employers and even for healthcare providers. This lack of visibility into pricing mechanisms and negotiations between PBMs and pharmaceutical manufacturers can hinder competition and potentially lead to higher healthcare costs for consumers.

Opportunity:

Integration of digital treatment program

The expanded use of evidence-based digital treatment programs to treat chronic illnesses is one area of digital health that, driven by customer demand. It is essential to change behavior in order to enhance employee health outcomes and to offer tried-and-true software, applications, and other digital technologies to assist people in managing and treating a wide range of illnesses. Offering digital treatment programs that are supported by clinical research and recognized by regulatory agencies can result in fewer complications or hospitalizations as well as lower healthcare expenditures for both the employee and the plan sponsor.

The integration of digital treatment programs in the United States pharmacy benefit management market is observed to present multiple opportunities as it offers several benefits such as personalized patient care, better medication adherence and better management of chronic conditions. These programs can enhance patient engagement, monitor medication usage and offer real-time data to healthcare providers, leading to more effective and efficient treatment outcomes. As a result, PBMs can leverage these digital solutions to optimize medication management, control costs and enhance patient well-being, thereby influencing the growth of the market.

U.S. Pharmacy Benefit Management Market Business Model Insights

The standalone PBM segment held the largest revenue share of 60.00% in 2023. Major players such as CVS Health and Express Scripts who underwent major mergers cater to this segment. Such mergers are anticipated to allow drug manufacturers to manage pricing policies and understand the pricing information of competitors. The market experienced consolidations between PBMs and health insurers leading to the strengthening of key players in the market.

PBM uses its scale to negotiate contracts between manufacturers and retailers, secure drug discounts, and determine which drugs qualify for various health care plans. Retail pharmacies are undertaking various strategic initiatives to include PBM services. For instance, in October 2019, Centene Corporation, Walgreens, and RxAdvance announced a strategic partnership to implement an innovative pharmacy management model aimed at increasing transparency, improving the customer experience, and ultimately delivering better healthcare outcomes at lower costs.

The health insurance providers segment is anticipated to expand owing to the increasing access to public health insurance and the rising number of people insured under commercial insurance. Due to the increasing number of beneficiaries, many payers prefer to have in-house PBM, which is driving segment growth. Furthermore, many insurers are acquiring PBMs or partnering with them to develop their own PBM platform. For instance, in December 2021, Humana announced the acquisition of Enclara Healthcare, a hospice PBM provider.

U.S. Pharmacy Benefit Management Market Service Insights:

The specialty pharmacies segment dominated the market with the highest market share in 2022.  Specialty pharmacies are special kinds of medication which is helpful for patients with chronic diseases and more severe illnesses, the rising cases of chronic diseases in the nations supplement to the segment’s growth. Specialty pharmacies deal with patients and pharmacies for providing medication for chronic illnesses. Specialty pharmacies provide treatment for patients with more detailed education. Specialty medication requires patient monitoring and management. There is an additional staff that works in the specialty pharmacies which will ensure education adherence and increase the effectiveness of the treatment plan. Specialty pharmacy staff communicate with patients up to date about adjustment and changes which are required for the treatment plan.

The retail pharmacies segment is expected to grow in the market during the forecast period. Retail pharmacy is the most common type of practice for Americans to visit for medication. Retail pharmacies are generally used for the common type of treatment and work on several prescriptions. Retail pharmacies offer medication for treatment like allergies, high blood pressure, cold and flu remedies, antibiotics, etc. The chances of adoption of pharmacy benefit management services by retail pharmacies are high owing to the availability of large number of consumers.

U.S. Pharmacy Benefit Management Market End-use Insights

The commercial segment held the maximum revenue and is estimated to dominate the market throughout the forecast period. The majority of U.S. employees are enrolled under commercial private insurance plans to benefit from the copay system for high-cost drugs. According to the Congressional Research Service, around 291 million people were covered by private insurance in 2022, combining group and non-group insurance.

Federal support is significant for government employees wherein premiums vary for different health plans and are paid in part by employers and employees. Employers usually pay up to 75.0% of the total amount in an average plan for self-only or family coverage while employees pay the rest. As per the Congressional Research Service, Medicaid covered 58 million people, Medicare covered 80 million people, and 15 million were covered under military insurance in 2021.

U.S. Pharmacy Benefit Management Market Recent Developments:

• In Aug 2023, Maria Cantwell and BUTLER COUNTY, Chuck Grassley (R-Iowa) announced the major nonprofit advocacy group “AARP” which is advertised by Pharmacy Benefit Manager (PBM) Transparency Act.
• In Aug 2023, the pharmacy-benefit manager of CVS Caremark dropped by Blue Shield of California in approval of a company’s group that will provide the services at the same cost. The drug-pricing contracts of pharmacy-benefit manager Prime Therapeutics used by the Blue Shield.

U.S. Pharmacy Benefit Management Market Top Key Companies:

• CVS Health
• Cigna
• Optum, Inc.
• MedImpact
• Anthem
• Change Healthcare
• Prime Therapeutics LLC
• HUB International Limited.
• Elixir Rx Solutions LLC

U.S. Pharmacy Benefit Management Market Report Segmentation

This report forecasts revenue growth at country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2021 to 2033. For this study, Nova one advisor, Inc. has segmented the U.S. Pharmacy Benefit Management market.

By Business Model

• Standalone PBM
• Health Insurance Providers

By Service

• Specialty Pharmacy
• Retail Pharmacy

By End-user

• Commercial
• Federal