U.S. Pharmacy Benefit Management Market - Industry Outlook & Forecast 2024-2029

INDUSTRY OUTLOOK

The U.S. pharmacy benefit management market was valued at USD 491.88 billion in 2023 and is expected to reach USD 680.73 billion by 2029, growing at a CAGR of 5.56% during the forecast period. The demand for the pharmacy benefit management market is rising due to multiple factors, including the rising baby boomers, the rising aging population, the increase in healthcare expenditure, the growing prevalence of heart diseases and nerve disorders, and the growing awareness among the general population. Furthermore, specialty pharmacies have experienced remarkable growth in recent years, driven by pharmaceutical advancements and the increasing prevalence of chronic diseases. These pharmacies specialize in dispensing medications for patients with complex conditions. Unlike traditional retail pharmacies, specialty pharmacies provide comprehensive support services, including medication management, adherence programs, and patient education. Also, vendors in the U.S. pharmacy benefit management market need to focus on pursuing inorganic growth strategies, such as acquisitions, to expand their presence, enhance service offerings, and improve expertise in the market.

WHY THIS REPORT?

This report provides

• Quick check market conditions & size of the U.S. pharmacy benefit management market
• Overviews of top manufacturers/marketed products, pipeline analysis, clinical trial analysis, competitive landscape, vendor profiles, mergers & acquisitions
• Reliable forecast data to support your business plans and goals.
• Insights to formulate effective sales and marketing strategies by understanding the competitive landscape and analyzing various competitors' performance.
• Identifies emerging players with potentially strong product portfolios and creates effective counter strategies to gain a competitive advantage.

MARKET TRENDS & DRIVERS

The Growth of Innovative PBM Pricing Strategies

The continued evolution of the PBM contracting model and pricing strategies is expected to continue over the years. For example, to counteract the high prices of specialty drugs, PBMs are embracing outcomes-based contracting. According to a recent national healthcare consulting firm study, 58% of payers had entered outcomes-based contracts as of 2022.

Another alternative PBM pricing strategy includes the growing use of innovative utilization tools. Advanced technology, the intent to continuously improve patient outcomes, and the desire to increase patient adherence to medications continually help utilization management tools evolve. By optimizing these outcomes through utilization tools, PBMs can identify opportunities for cost savings while improving patient outcomes.

Increased Utilization of Real-Time Performance Optimization

Plan sponsors in the U.S. pharmacy benefit management market are looking to understand PBM contracts better while using PBMs that implement new data analytics solutions and insights, such as those found through AI and automation tools, to optimize and increase utilization of real-time performance. According to Milliman, pinpointing changes and areas for improvement within the PBM’s contract can significantly reduce pharmacy program costs without changing members’ benefits. One way to utilize real-time performance optimization is to incorporate new data analytics solutions into the PBM relationship.

SEGMENTATION INSIGHTS

INSIGHTS BY HEALTH PLAN

The U.S. pharmacy benefit management market by health plan is segmented as commercial health plans, medicare plans, medicaid plans, and others. The commercial health plans segment dominated the U.S. market share in 2023. According to the U.S. Census, 66% of Americans have commercial health insurance, mainly through an employer. An estimated 54% get coverage through an employer-sponsored health insurance plan. Also, preferred provider organizations (PPOs) are the most common type of health plan for covered workers, followed by high deductible health plans (HDHPs). However, it is observed that there is a slight decrease in the market share occupancy of commercial health plans due to the increase in the adoption of Medicare plans by people across the United States. The Medicare plan segment is the fastest-growing segment in the U.S. market. The growth of this segment is attributed to several factors, which include a shift towards virtual care delivery, more home care, and the adoption of value-based care models.

INSIGHTS BY BUSINESS MODEL

The U.S. pharmacy benefit management market by business model is segmented as insurance companies & retail pharmacies and pure play PBMs. The insurance companies & retail pharmacies segment dominated the market share in 2023. Also, CVS Health, Walgreens Boots Alliance, Cigna, UnitedHealth Group, Walmart, Kroger, and Rite Aid accounted for 70% of U.S. prescription dispensing revenues in 2022. The market is well backed, fortifying the future growth of this segment by ramping up its capital investments in data analytics capabilities and technology R&D. Further, MedImpact, Navitus, and PerformRx are the top emerging standalone PBMs in the current US market. As plan sponsors seek rebates and rebates to deduct high drug costs, self-funded products, and direct contracts with PBMs are increasing. This has proven to be beneficial for independent PBMs.

INSIGHTS BY SERVICE

The specialty pharmacy services hold the largest share of the U.S. pharmacy benefit management market under the service segment. The growth of this segment is due to many reasons, including the new medications in the drug pipeline, new treatment indications, and an increase in chronic condition diagnoses. Also, most specialty pharmacies deliver medications by mail, but some may offer in-person pickup. A specialty pharmacy is also much more involved in treatment. That’s because missing doses could cause serious problems for people with complex medical conditions.

The claims processing segment is projected to be the fastest-growing service segment in the U.S. pharmacy benefit management industry. The primary objective of a pharmacy benefit claims audit is for a plan sponsor to meet its fiduciary responsibility by verifying that the claims are adjudicated accurately according to the plan’s summary plan description (SPD) and contractual agreements. PBM claims auditing is beneficial for monitoring payment integrity and fraud, waste, and abuse of health plans, employers, Medicare Advantage Part D plans, brokers, Taft-Hartley funds, and other pharmacy plans.

GEOGRAPHICAL ANALYSIS

The south region dominated the U.S. pharmacy benefit management market, accounting for a share of over 29% in 2023. Further, Kentucky, West Virginia, Virginia, and Louisiana are the top states with a high percentage of insurers among the southern states in the United States. It is observed that 90% of the total population is insured by government or non-government firms. Also, with its recent adoption of the Affordable Care Act (ACA) Medicaid expansion to adults, Louisiana became the 32nd state to move forward with the expansion and the 7th of the 17 states that make up the American South to expand.

The Midwest region held a significant share of the U.S. pharmacy benefit management market in 2023. Michigan, Minnesota, Iowa, and Wisconsin are the top states with the most insured people in the U.S. Midwest region. Further, Medical Assistance (MA) is Minnesota's largest healthcare program and serves children and families, pregnant women, adults without children, seniors, and people who are blind or disabled. Also, the Minnesota Department of Commerce and the federal government regulate Medicare Cost and Medicare Supplement and Select insurance plans. The federal government is responsible for overseeing Medicare Advantage and Part D plans.

VENDOR LANDSCAPE

CVS Health, Cigna, UnitedHealth Group, Prime Therapeutics, MedImpact, and Humana Pharmacy Solutions are the key players in the U.S. pharmacy benefit management market. Furthermore, few recent entrants have made a mark in the market. PBMs are expected to witness a more competitive and challenging atmosphere due to increased consumer pressure, political pressure, legal scrutiny, and the forces of new, innovative players in the healthcare space. Also, in local markets in the U.S., where pharmacy benefit managers (PBMs) provide services to commercial health insurers, there is a widespread lack of competition, according to a new report from the American Medical Association (AMA).

CVS Health is one of the key vendors in the U.S. pharmacy benefit management market. CVS Health specializes in providing healthcare and retail pharmacy services. The company offers healthcare and wellness products, beauty products, prescription medications, and personal care products. It also offers pharmacy benefit management (PBM) services, disease management and related services, administrative services, Medicaid health care management services, and prescription drug plans. It markets products through retail pharmacies, online retail pharmacy websites, onsite pharmacies, LTC pharmacies, and MinuteClinic clinics.