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The global pharmacy benefit management market size was valued at USD 513.98 billion in 2022. The market is projected to grow from USD 540.32 billion in 2023 to USD 809.79 billion by 2030, exhibiting a CAGR of 6.0% during the forecast period.
Pharmacy benefit management companies exist among insurance providers, pharmacy stores, and drug manufacturers. They negotiate with drug manufacturers and retail pharmacies to manage generic and branded drug spending. The rising prevalence of chronic diseases and increasing healthcare expenditure in developed and emerging countries are resulting in the growing demand for cost management of prescription drugs. This leads to a boost in demand for these services in the global market.
Drug price inflation has recently impacted healthcare spending, increasing the adoption of these services among health insurance providers. Hence, the rising prevalence of chronic diseases and drug price inflation have been instrumental in propelling the pharmacy benefit management market growth.
Thus, a significant increase in drug cost is fueling the demand and adoption of Pharmacy Benefit Management (PBM) services and is expected to further augment the market growth during the forecast period.
High-priced COVID-19 Vaccine and Specialty Drugs Led to Demand for Pharmacy Benefit Management Services
The COVID-19 pandemic had a positive impact on the global PBM market. Several major players, including OptumRx, Inc. and Cigna reported a significant increase in their revenue. However, due to the completion of vaccination drives in majority of the countries, along with the availability of a wide range of medication at a lower price, the revenue of key companies operating in the market returned to the pre-pandemic level by 2021.
Additionally, increasing healthcare expenditure due to the introduction of expensive specialty drugs and COVID-19 vaccines globally augmented the demand for price management of prescription and OTC drugs. For instance, according to the Centers for Medicare & Medicaid Services, in December 2021, it was reported that the total national health expenditure in the U.S. increased to USD 4.1 trillion in 2020, a growth of 9.7% compared to the previous year. Thus, a significant number of insurance providers are relying on service providers to negotiate the drug price with retail pharmacy units and lower the price of the listed drugs in the insurance coverage.
Furthermore, increasing initiatives, such as extending mail order delivery services and strengthening distribution networks in remote areas, were responsible for the growing adoption of these services. Hence, these initiatives by major players and increasing demand for specialty drugs boosted the market growth during the COVID-19 pandemic.
Increasing Adoption of Machine Learning to Smoothen Workflow Boosts Market Growth
The rising adoption of pharmacy benefit management services among insurance providers, retail pharmacy chains, and drug manufacturers is shifting the preference of service providers from conventional workflow to advanced workflow by utilizing machine learning. As a result, the companies can provide a streamlined supply chain, quick mail order delivery, and cater to many insurance and retail pharmacy chains within a short period.
For instance, CAPITAL RX, a prominent player in the U.S., utilizes Machine Learning (ML) and Artificial Intelligence (AI) algorithms to reduce human error and time for claim processing. Thus, the integration of ML and AI technology into the workflow is leveraging the companies to reduce medical costs and increase the efficiency of the coverage procedures.
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Increasing Pharmaceutical Expenses to Drive Market Growth
The global population's rising prevalence of chronic diseases is increasing the demand for treatment options. As a result, numerous large pharmaceutical companies are concentrating on developing high-cost branded medications to treat chronic diseases. This led to an increase in pharmaceutical spending significantly in the past few years.
This, along with an increasing number of prescription filings in recent years for a wide range of chronic diseases, including cardiovascular diseases, chronic lung diseases, and others, is increasing healthcare expenditure. For instance, according to a survey report by SingleCare Administrators in 2022, an estimated 4 billion prescriptions are dispensed each year in the U.S. and is further expected to experience a significant hike in the prescription filing count within a few years.
Thus, a significant rise in drug cost, along with an increase in the number of prescription filing globally, is leading to an increase in the health care burden. This has resulted in increased demand and adoption for these services to reduce drug costs, manage pharmaceutical spending, and aid market expansion during the forecast period.
Lack of Transparency in Profit Earnings Responsible for Restricting Adoption
Increasing drug spending and growing prescription filing globally are key factors driving market growth. However, various transparency issues associated with pharmacy benefit management business practices are always a concern in pharmacy benefit management services. The revenue sources of these services are rarely disclosed to the insurance providers, retail pharmacy units, or drug manufacturers. As a result, a large proportion of drug costs goes to the service providers.
Thus, drug manufacturers and insurance providers are experiencing a significant decrease in profit. As a result, most insurance providers abandon collaborating with PBMs, while those who have, feel reluctant. Hence, the adoption rate of these services is reducing and is anticipated to hinder market growth during the forecast period.
Rising Demand for Specialty Medicines Resulted in Segmental Dominance
By service, the market is segmented into specialty pharmacy service, benefit plan design & administration, pharmacy claims processing, formulary management, and others. The specialty pharmacy services segment accounted for the highest pharmacy benefit management market share in 2022. The rising prevalence of chronic and rare diseases increased the demand for treatment options such as specialty drugs. However, high-priced drugs are unaffordable for the majority of the patient population, leading to the growing demand for these services to decrease the price of specialty drugs to an affordable range. The growing demand for specialty drugs is driving the specialty pharmacy services segment growth.
The benefit plan design & administration segment is expected to grow with the highest CAGR during the forecast period due to increasing number of patients opting for medical insurance coverage and benefit plan design for their medical treatment. According to the Centers for Medicare and Medicaid Services (CMS) Medicare Advantage Enrollment Files, 30.8 million people in the U.S. were enrolled in a Medicare Advantage plan, which accounted for 51.0% of the eligible Medicare population in 2023.
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Consolidation Between Insurers and Service Providers Led to Major Dominance of Insurance Companies Segment
Based on service provider, the market is divided into insurance companies, retail pharmacies, and standalone PBMs. The insurance companies segment dominated the market share. An increasing number of mergers and acquisitions between insurance companies and pharmacy benefit management service providers leads to segmental dominance during the forecast period.
The retail pharmacies segment is anticipated to grow with the highest CAGR during the study period. An increasing number of retail pharmacy units and the entrance of big companies, including Amazon & Walmart into the retail pharmacy chain are some of the major key factors attributed to the rapid growth of the segment.
The market size in the U.S. stood at USD 498.47 billion in 2022. The presence of a large patient population under medical coverage, favorable government regulations for pharmacy benefit managers, and the increasing number of pharmacy benefit managers in the country are the prominent factors for regional dominance.
Canada is expected to grow with the highest CAGR during the forecast period. Increasing pharmaceutical spending and a growing number of prescription filings in Canada are leading to increased demand for pharmacy benefit management services.
The market in the rest of the world is anticipated to grow with a significant CAGR during the forecast period. An increasing number of health awareness programs and a rising number of health plan offerings by insurance providers in Brazil and South Africa are anticipated to boost the adoption rate of pharmacy services. Therefore, this will propel the demand and adoption of pharmacy benefit management services and substantially boost market growth during 2023-2030.
Inorganic Growth Strategies by Key Players Led to Market Dominance
Major players, such as CVS Health, OptumRx, Inc., and Cigna, dominate the market. Constant focus on inorganic growth strategies, including partnership and acquisition of other players to expand the brand presence, are some of the key contributing factors to market dominance.
Prominent players, including Medimpact, Anthem, Inc., and other companies are focusing on introducing new solutions and features to expand their portfolios and increase customer reach. For instance, in September 2020, Medimpact introduced a new solution to integrate prescription discount card savings with a traditional plan. Centene Corporation and Abarca Health LLC are the other key players operating in the market.
An Infographic Representation of Pharmacy Benefit Management (PBM) Market
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The pharmacy benefit management market research report provides a detailed analysis of the industry and focuses on key aspects such as leading companies, services, and service providers. Moreover, it offers insights into the market trends and highlights key industry developments. In addition to the aforementioned factors, the market report encompasses several factors that have contributed to the growth of the market in recent years.
CAGR of 6.0% from 2023-2030
Value (USD Billion)
By Service, Service Provider, and Country/Region
By Service Provider
Fortune Business Insights says that the global market stood at USD 513.98 billion in 2022 and is projected to reach USD 809.79 billion by 2030.
In 2022, the U.S. market value stood at USD 498.47 billion.
The market will exhibit steady growth at a CAGR of 6.0% during the forecast period (2023-2030).
By service, the specialty pharmacy services segment is leading the market.
Increasing pharmaceutical expenses and rising number of prescription filing are the key drivers of the market.
CVS Health, OptumRx, Inc., and Cigna are the top players in the market.
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