The Next Phase of Vertical Integration: Wholesalers Follow the PBM Playbook

Over the past decade, vertical integration has redefined how power and profit are distributed across the US drug supply chain. Health plans and pharmacy benefit managers (PBMs) led the first wave, consolidating control over prescription drug pricing, distribution, and patient access. Now, a second wave is gaining momentum — one that sees the nation’s largest pharmaceutical wholesalers stepping into a similar role. In recent years, policymakers and stakeholders have begun to question how health plans and PBMs have consolidated power across the drug supply chain by controlling formularies, reimbursement, and patient access. But a new player is quietly expanding its reach: drug wholesalers.

This emerging trend mirrors the path taken by PBMs and health plans in key ways: these parties began as intermediaries designed to bring efficiency to a complex system and evolved into vertically integrated entities that own or control multiple steps of the supply chain. The wholesalers’ latest moves into physician practice management and specialty drug administration represent the next stage in this consolidation trend and could raise the same transparency and competition concerns that regulators, payers, providers, and consumers have grappled with in the PBM space for years.

The PBM/Health Plan Blueprint: From Administrator to Gatekeeper

The PBM model began as a service function, primarily processing claims, negotiating rebates, and managing formularies on behalf of health plans and employers. But over time, PBMs and their affiliated insurers expanded their reach, acquiring or building their own specialty pharmacies, mail-order operations, and even retail chains. The most visible example came in 2018 when CVS acquired Aetna, integrating a major health insurer, pharmacy chain, and PBM, as well as other service providers, under one roof.¹

Through these integrations, PBMs became gatekeepers of drug access and pricing. By determining formulary placement and reimbursement rates, they shaped which drugs patients received, from which pharmacies, and at what cost. Although proponents argued this model created efficiencies and scale, critics have long pointed to conflicts of interest, opaque pricing practices, and the erosion of competition.

According to the Department of Health and Human Services (HHS), PBMs captured an estimated 31.2% margin in 2022, compared with 6.3% for wholesalers in the same year.² The stark difference highlights how PBMs’ vertically integrated business models have proven far more profitable. That success has encouraged other segments within the health care sector, including wholesalers, to adopt similar integration strategies.

Market concentration has amplified these effects. Today, just 4 PBMs control roughly 70% of the market, with the top three processing nearly 80% of all prescription claims nationwide.³ That level of control has made PBMs central players in determining how and where Americans access prescription drugs and provided a model that others are now emulating.

Wholesalers’ Turn: Following the Path to Integration

According to a new analysis from Drug Channels Institute, the buy-and-bill market, in which physicians purchase and administer drugs directly in their offices, is emerging as the next frontier for vertical integration.⁴ The nation’s 3 largest wholesalers—Cencora (formerly AmerisourceBergen), Cardinal Health, and McKesson—are no longer simply distributing medicine. They’re partnering with or buying private equity–backed management groups that run oncology, ophthalmology, urology, and gastroenterology practices.⁵

The nation’s three largest pharmaceutical wholesalers, Cencora (formerly AmerisourceBergen), Cardinal Health, and McKesson, have long dominated the pharmaceutical wholesaler segment, together accounting for roughly 95% of the market as of 2018. For years, their operations were largely transactional, purchasing medications from manufacturers and supplying them to pharmacies, hospitals, and physician offices at volume-based margins.

As Drug Channels notes,“the Big Three wholesalers have become dominant players in acquiring or partnering with private-equity-backed [management service organizations]. Together, they’ve spent over $16 billion to acquire complete or partial ownership in eight transactions with disclosed values.”⁴

Why does this matter for policymakers and regulators? Because this expansion moves wholesalers closer to the point of care, blurring traditional lines of oversight. The same entities that supply and finance specialty drugs are now taking ownership stakes in the very practices that prescribe and administer them.

This trend mirrors the vertical integration long seen among PBMs and health plans⁶, but with even fewer policy safeguards in place, as wholesalers adopt similar strategies to stay competitive. Oversight of physician-practice acquisitions and this type of consolidation, particularly at the wholesaler level, remains largely unexamined.

As drug pricing, site-of-care reform, and market competition rise on the policy agenda, the growing role of wholesalers deserves closer scrutiny. From distribution hubs to direct care, the wholesalers’ move upstream represents a powerful and, thus far, overlooked shift in who controls access and economics across the drug channel.

With shrinking margins and intensifying competition eroding the profitability of traditional distribution, wholesalers have turned to vertical integration to capture more value. Analysts from the Drug Channels Institute and HHS have noted that wholesalers’ margins remain under sustained pressure, prompting a strategic pivot toward higher-value, service-oriented, and integrated business lines.^2,4 Increasingly, they are investing in or acquiring management services organizations (MSOs) that manage or own physician practices administering high-cost specialty drugs in fields such as oncology, ophthalmology, and urology.

This “buy-and-bill” space has historically offered stronger margins because physician practices purchase drugs directly, bill payers for reimbursement, and capture a spread between acquisition cost and reimbursement rate. By acquiring or financing these MSOs, wholesalers are positioning themselves not only as suppliers but as partial owners of the sites where drugs are prescribed and administered.

In essence, wholesalers are moving from serving providers to being providers, or at least owning a piece of the care delivery infrastructure. It is a transformation reminiscent of how PBMs moved from being administrators to owners of pharmacies and insurers.

A Familiar Playbook

The similarities between the PBM model and the wholesalers’ emerging strategy are striking.

• ·Vertical control over multiple steps in the supply chain: PBMs achieved control by integrating across insurance, pharmacy, and distribution. Wholesalers are now integrating across distribution and provider administration, bringing the supply and delivery functions under a single umbrella.
• ·Margin protection and diversification: Both sectors turned to vertical integration as traditional revenue streams became squeezed. For PBMs, it was declining administrative fees and rebate scrutiny; for wholesalers, it is thinning distribution margins. In both cases, owning more of the chain provides new revenue streams and bargaining leverage.
• ·Ability to steer utilization: PBMs have long directed prescriptions toward their own pharmacies or preferred formularies. Wholesalers are now in a similar position. By owning or financing MSO-affiliated practices, they may be able to influence product utilization and site-of-care decisions. For example, they could affect whether a patient receives an infusion in a physician’s office or a hospital outpatient setting.
• ·Regulatory lag: PBMs operated for years before regulators began to understand the implications of their integrated model. Wholesalers will benefit from a similar lag as few regulatory frameworks specifically address ownership of provider entities by drug distributors, even as these arrangements grow.
• ·Consolidation and market dominance: The PBM market coalesced around a handful of dominant players, but the wholesaler market is already concentrated among the big three. With limited competition, these firms have both the incentive and the scale to reshape how specialty drugs reach patients.

The Strategic Rationale

From a business standpoint, wholesalers’ vertical integration makes sense. Specialty drugs are often complex biologics that require physician administration and are among the fastest-growing segments of health care spending.

By extending their reach into this domain, wholesalers gain:

• Access to higher-margin services tied to drug administration rather than mere distribution
• Deeper relationships with prescribers, enhancing control over utilization and product selection
• Better data visibility across prescribing patterns, patient adherence, and reimbursement flows
• Greater leverage with manufacturers and payers alike, as they control both supply and site-of-care logistics

Wholesalers are embedding themselves directly within the care delivery infrastructure where those drugs are used.

Where Do We Go from Here?

If history is any guide, unchecked vertical integration can entrench incumbents, obscure pricing, and erode market competition. The PBM and health plan experience offers clear lessons:

• Early transparency requirements matter. Once complex ownership structures are entrenched, unwinding conflicts of interest becomes far more difficult.
• Competition fosters accountability. When a few entities dominate distribution and care delivery, payers and patients lose bargaining power.
• Data control equals market control. PBMs gained influence not just by owning assets, but also by controlling data on pricing, utilization, and rebates. Wholesalers are now moving into that same data-rich space.

Recognizing these dynamics early could allow policymakers to preempt some of the distortions that followed PBM consolidation.

Wholesalers’ expansion into physician practice management and specialty care marks a new phase in the vertical integration, but it’s hardly a new story. It follows the same economic logic that drove PBMs and health plans to consolidate power across the supply chain: control more steps, capture more margin, and leverage that control to shape how care is delivered.

In short, wholesalers are not inventing a new model; they are perfecting one. The path they are walking has already been mapped by PBMs, health plans, and the decades of consolidation that have come before. The critical question now is whether stakeholders will learn from that experience before history repeats itself.

REFERENCES

1. CVS Health completes acquisition of Aetna, marking the start of transforming the consumer health experience. News release. CVS Health. November 28, 2018. Accessed February 3, 2026. https://investors.cvshealth.com/news/news-details/2018/CVS-Health-Completes-Acquisition-of-Aetna-Marking-the-Start-of-Transforming-the-Consumer-Health-Experience/default.aspx

2. Pharmaceutical supply chain intermediary margins in the retail channel. Office of the Assistant Secretary for Planning and Evaluation. January 14, 2025. Accessed February 3, 2026. https://aspe.hhs.gov/reports/margins-retail-channel#:~:text=KEY%20POINTS,drugs%20in%202022%2C%20respectively).

3. Minemyer P. AMA study: the 4 largest PBMs control 70% of the market nationally. Fierce Healthcare. September 9, 2024. Accessed February 3, 2026. https://www.fiercehealthcare.com/payers/ama-study-four-largest-pbms-control-70-market-nationally

4. Fein AJ. The future of buy-and-bill market access: five drivers of wholesalers’ vertical integration with physician practices. Drug Channels. October 21, 2025. Accessed February 3, 2026. https://www.drugchannels.net/2025/10/the-future-of-buy-and-bill-market.html

5. Kim K. Drug distribution industry trends for 2025. Morningstar. June 4, 2025. Accessed February 3, 2026. https://www.morningstar.com/stocks/drug-distribution-industry-trends-2025

6. Fein AJ. Mapping the vertical integration of insurers, PBMs, specialty pharmacies, and providers: DCI’s 2025 update and competitive outlook. Drug Channels. April 9, 2025. Accessed February 3, 2026. https://www.drugchannels.net/2025/04/mapping-vertical-integration-of.html