The 340B Contract Pharmacy Market in 2025: Big Chains and PBMs Tighten Their Grip

The 340B Drug Pricing Program has emerged as a growing source of profits for pharmacies and pharmacy benefit managers (PBMs).

Drug Channels Institute’s latest exclusive analysis of the 2025 market reveals a highly concentrated market structure increasingly dominated by a handful of major players:

• About 32,000 pharmacy locations—nearly 60% of the entire U.S. pharmacy industry—function as contract pharmacies for the hospitals and federal grantees that participate in the 340B program.

• The 340B contract pharmacy has become increasingly concentrated with five multi-billion-dollar, for-profit, publicly traded pharmacy chains and pharmacy benefit managers (PBMs)—Cigna (via Express Scripts), CVS Health, UnitedHealth Group (via Optum Rx), Walgreens, and Walmart.

The 2025 market data below illustrate just how far the 340B program’s operations have diverged from its original intent. As Senator Bill Cassidy recently noted, the 340B program “was never meant to be part of an earnings call. It was meant to be part of patient care.”

For more on what the 340B program’s growth means for pharmacies, join Adam J. Fein, Ph.D., and Antonio Ciaccia on June 20 for a new live video webinar: What’s Next for Retail Pharmacy: Data, Debate, and Disruption.

340BACKGROUND

Over the years, we have written extensively about the roles and profits of 340B contract pharmacies. For a comprehensive deep dive into the 340B Drug Pricing Program, see Sections 11.5 and 12.3.5. of DCI’s 2025 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.

Briefly, the 340B program mandates that pharmaceutical manufacturers provide outpatient drugs to certain healthcare providers—known as eligible covered entities—at significant discounts. To be eligible for program participation, providers must be one of six designated hospital types or be a federal grantee—an entity that receives federal grants administered by different agencies within the U.S. Department of Health and Human Services (HHS). Disproportionate share hospitals (DSHs)—one of the six eligible hospital types—account for 80% of total 340B purchases.

In 2010, the Health Resources and Services Administration (HRSA), the HHS agency that oversees the 340B program, introduced subregulatory guidance permitting covered entities to access 340B pricing through an unlimited number of contract (external) pharmacies. These actions remain controversial and are the subject of complex, multiparty litigation.

To profile the 340B contract pharmacy market for 2025, Drug Channels Institute examined HRSA’s Contract Pharmacy Daily Report, as published on June 1, 2025. We screened out all contracts that had been terminated before that date. Using our proprietary database, we classified all contract pharmacy locations by parent organization. Many chains and PBM-owned pharmacies were listed with multiple alternate names in the HRSA database.

340BOOM

Following the 2010 guidance change, 340B covered entities embarked on a rapid expansion of contract pharmacies. Here are key observations on the 340B contract pharmacy market’s growth:

• In 2010, fewer than 1,300 unique locations functioned as 340B contract pharmacies.

• By 2013, we found more than 12,000 340B contract pharmacy locations. This was DCI’s first public analysis of the contract pharmacy market.

• As of mid-2025, DCI counted 32,069 unique locations acting as 340B contract pharmacies. These sites accounted for nearly 60% of all U.S. retail, mail, long-term care, and specialty pharmacy locations.
  
  The 2025 figure marks the second consecutive year since 2010 in which the number of pharmacy locations decreased. This decline results from the ongoing shakeout in the retail pharmacy industry, not a change in covered entities’ use of 340B contract pharmacies. (See Exhibit 265 of our 2025 economic report.)

It's important to understand that the raw number of locations provides a misleading picture of the 340B contract pharmacy marketplace. That’s because an individual contract pharmacy location can have relationships with multiple covered entities. A typical mail and specialty location operates as a 340B contract pharmacy for hundreds of covered entities. By contrast, a typical retail pharmacy location operates as a contract pharmacy for fewer than five covered entities.

For 2025, these more than 32,000 pharmacies have 229,531 contractual relationships with 12,298 340B covered entities, i.e., there are almost 230,000 unique contract pharmacy/covered entity relationships. Despite the reduction in unique locations for 2025, the number of contractual pharmacy relationships grew by about 10,000 relationships (+4%), although at a slower rate compared to the previous year’s growth (+13%).

THE 340BIG FIVE

The chart below shows 2025’s five largest contract pharmacy participants based on the total number of relationships with 340B covered entities by dispensing format (retail locations vs. mail, specialty, and infusion pharmacies).

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Here are key observations from our 2025 analysis:

• The largest five companies account for 76.1% of the contract pharmacy market. Consistent with our previous analyses, the five largest contract pharmacy participants are CVS Health, Walgreens Boots Alliance, Walmart, Express Scripts (Cigna), and Optum Rx (UnitedHealth Group). These companies are also among the largest U.S. pharmacies by prescription revenues. Below, we show how their share of the market has expanded.

• CVS Health and Walgreens dominate the 340B retail pharmacy market. The two largest drugstore chains account for most retail pharmacy relationships with 340B covered entities. More than 90% of retail locations of each company now function as 340B contract pharmacies. Other chains with a significant presence include Albertsons, Kroger, Publix, and Rite Aid.

• Mail, specialty, and infusion pharmacy relationships from the three largest PBMs now comprise 25% of the 340B contract pharmacy market. The three big PBMs—the CVS Caremark business of CVS Health, the Express Scripts business of Cigna, and the Optum Rx business of UnitedHealth Group—have grown at a faster rate than retail pharmacy relationships. The number of non-retail relationships of these three companies quadrupled from 14,000 in 2020 to 57,000 in 2025.

• Market concentration has increased substantially over the past 10 years. The chart below shows the rapid growth of the 340B contract pharmacy marketplace. The number of contract pharmacy / covered entity relationships has grown at a compound annual rate of 21%, from 42,290 relationships in 2016 to 229,531 in 2025. That’s comparable to the skyrocketing growth in 340B drug purchases.
  
  
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  The top companies’ share has also soared during this period, from 55.9% of relationships in 2016 to 76.1% of relationships in 2025.

OUTLOOK

Our 2025 analysis confirms that large, for-profit companies have entrenched themselves at the center of the 340B contract pharmacy marketplace. The Senate’s recent investigation into the program’s financial dynamics revealed just how lucrative this sector has become. See Follow the 340B Dollar: Senator Cassidy Exposes How CVS Health and Walgreens Profit as 340B Contract Pharmacies.

According to the report, third-party payers ultimately fund most of the 340B program’s profits for covered entities and their contract pharmacy partners. PBM-affiliated specialty pharmacies also retain a share of 340B discounts. For specialty prescriptions, commercially insured patients often chip in as much as one-third of the 340B profits earned by covered entities and contract pharmacies.

As we have long argued at Drug Channels, the 340B program urgently needs modernization. The Inflation Reduction Act (IRA) will start to force change into the opaque and highly-profitable 340B program. Reforms must realign the program with its original intent: to support true safety-net providers and expand access for the low-income and uninsured patients who need it most.

Because when a safety-net becomes a profit net, it’s time to untangle the tentacles.

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This article was coauthored by Adam J. Fein, Ph.D., and Greis Kapexhiu.