US Drug Distribution: GLP-1s, Prices, and Outlook

It’s not just drugmakers reshaping the pharmaceutical sector; distributors are rapidly transforming, too. While most investors and policymakers focus on rising prescription drug prices or direct-to-consumer offerings, the engine quietly driving the entire pharmaceutical supply chain is gaining strength.

Today, the industry is both highly concentrated and evolving, with three companies controlling more than 90% of the market and expanding beyond logistics into data, services, and strategic partnerships.

As new therapies, specialty drugs, and shifting pricing dynamics reshape healthcare, distributors are positioned to benefit from strong demand even as margin pressures persist. For a complete look at what is driving growth in the industry and what tactics distributors are using to maintain a competitive edge, download the full US Drug Distribution landscape report.

The US drug distribution industry is a critical component of the healthcare supply chain, ensuring medications are safely and efficiently delivered from manufacturers to various healthcare providers, including pharmacies, clinics, and hospitals.

Drug distributors purchase pharmaceuticals from biopharma firms, store them, and safely deliver them to pharmacies, physician offices, clinics, and hospitals.

By managing logistics at scale, distributors enhance productivity and reduce costs within the drug supply chain, allowing manufacturers and healthcare providers to focus on their core responsibilities.

The US drug distribution market is effectively an oligopoly. McKesson MCK, Cencora COR, and Cardinal Health Inc CAH, also known as the Big Three, make up over 90% of the market by revenue.

This concentration grants them massive scale and bargaining power across the pharmaceutical supply chain, from biopharma companies to pharmacies and hospitals. Each has fortified its position by forming joint ventures with major pharmacy partners such as CVS Health Corp CVS, Walgreens, and Walmart WMT, allowing them to negotiate better prices on generics and lock in key relationships for the foreseeable future.

McKesson won over UnitedHealth Group Inc UNH’s OptumRx from Cardinal Health during mid-2025, a contract that generated over $35 billion over the past 12 months. This helped McKesson outperform the other two distributors during 2025.

Healthcare providers face high switching costs. Switching costs refer to the time, money, and effort required for healthcare providers to change distributors. Combined with tight integration across the supply chain, this makes disruption unlikely.

Morningstar forecasts high-single-digit sales growth through 2030 for the Big Three, driven by an aging population, rising prescription volumes, and steady demand for specialty drugs.

Outside of Cardinal, Cencora, and McKesson, the market comprises independent drug distributors specializing in specialty pharmaceuticals on the buy side and small and independent pharmacies and hospitals on the sell side.

Specialty drugs for rare or complex health conditions now account for over half of US drug spending, despite representing a small fraction of prescription volume. Distributors invest heavily in high-margin services like logistics, revenue cycle management, and data analytics to offset the margin compression from high-priced branded drugs.

Distributors can unlock better economics from customers by offering services like third-party logistics, consulting, claims collection, and inventory management. We have seen the Big Three distributors expand their presence in this space in recent years.

GLP-1s were first approved to treat diabetes but now see stellar growth as novel obesity therapies. They have been one of the main recipients of attention in the biopharma market since 2022, and their impact has trickled down nicely to drug distributors.

We estimate that about 30% of the Big Three distributors’ growth in the past 12 months was from GLP-1s. This is impressive, given that spending on obesity drugs in 2025 made up less than 15% of US prescription spending. By our analysis, this class of medications made up roughly 11% of distributors’ collective revenue in 2025, but we expect this level to jump to 15% by 2030.

One downside of GLP-1s is their margin headwinds. Since the largest pharmacies predominantly dispense branded drugs and require special delivery methods like cold-chain handling, they carry lower margins than generics. Segment operating margins have declined sequentially for all three distributors, reaching their lowest level of the past three years.

However, we still view GLP-1s as a net positive to distributors because they boost the top line and offer opportunities for distributors to sell other high-margin services like prior authorization solutions.

Recently, some manufacturers have developed online direct-to-consumer channels to offer certain medications and bypass distributors. Eli Lilly launched LillyDirect in January 2024, and Novo Nordisk launched NovoCare in March 2025. There are also telehealth platforms like Hims & Hers.

Patients can directly get medicines like GLP-1s on all three platforms without having to visit a pharmacy. And we think DTP channels enable Lilly and Novo to connect with cash pay customers since obesity drugs carry lower coverage rates compared with other drugs.

Despite manufacturers working to reach patients directly and avoid relying on distributors for certain medications, we don’t anticipate these efforts to have a transformative impact on the overall drug distribution industry. Limitation on offerings, inconvenience in transferring prescriptions, and the ingrained nature of retail and mail-order pharmacies all make us skeptical that DTC channels will disrupt distributors.

Unlike their generic counterparts, branded drugs have seen their list prices increase year over year as manufacturers work to offset rebate pressures from pharmacy benefit managers. Since branded drug prices are directly tied to distributors’ top lines, this price inflation has helped drive sales growth.

This has had an inverse impact on margins. Profit per prescription for branded drugs that distributors receive used to be closely tied to prices, so an increasing branded drug price somewhat protected distributors’ margins. But now all three distributors see very minimal gross profit impact from rising prices because most branded drug buy-side dollars are fee for service. This means despite an increase in drug prices, the fees distributors receive largely remain the same.

This dynamic compresses distributors’ margins. We have seen this at play over the past several years with no signs of the trend reversing. If branded drug prices keep rising and generic drug prices keep falling, distributors will continue to face margin headwinds.

Generic drugs make up 90% of US prescriptions but less than 20% of spending, and an even smaller portion of revenue for distributors. Despite this, generics are critical to the business model because they deliver the highest margins. That’s largely due to competition among manufacturers, which gives distributors more leverage to negotiate better prices.

However, as more generics have entered the market, prices have dropped sharply. Median generics prices fell 40% from 2015 to 2025. In recent years, price erosion for generics has stabilized to a low- to mid-single-digit annual decrease.

The next wave of margin support could come from biosimilars. These are near-identical versions of expensive biologic drugs whose patents have expired. Biosimilars tend to offer higher profit potential than traditional branded drugs because distributors can once again play the middleman role, negotiating prices across multiple suppliers.

We think future biosimilar uptake could become a meaningful tailwind for both revenue and margins over the next five years.

We think the market has rallied behind the US drug distribution industry recently due to strong GLP-1 contributions, increasing specialty asset investments, and relative safety against tariffs and macroeconomic downturn.

Since the beginning of 2025, the Big Three distributors have delivered an average 58% gain, compared with the Morningstar US Healthcare Index’s 7%. For financial advisors, this underscores a few takeaways:

• Look for resilient competitive advantages with the Economic Moat Rating. Drug distributors’ dominance and deep relationships create durable, narrow moats.
• Monitor volatility. The Fair Value uncertainty rating accounts for possible scenarios affecting a company’s future cash flows. The Big Three drug distributors all have uncertainty ratings of Medium.
• Keep an eye on portfolio exposure to the healthcare sector.

The bottom line? Long-term trends in drug distribution including, specialty growth, evolving pricing dynamics, and expanding service offerings, continue to shape the economics of healthcare delivery and support sustained industry growth. 

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