However, our 2026 analysis finds that the contract pharmacy market is now entering a more mature phase characterized by consolidation, slower growth, and increasing dominance by the industry’s largest participants.
Below, we characterize the state of the marketplace:
- Nearly two-thirds of the entire U.S. pharmacy industry participates as contract pharmacies for the 340B hospitals and federal grantees.
- The number of 340B pharmacy locations declined for the third year, due largely to the retail pharmacy shakeout and manufacturers’ 340B policies.
- Meanwhile, the total number of unique contract pharmacy/covered entity relationships continues to expand. Five multi-billion-dollar, for-profit, publicly traded pharmacy chains and pharmacy benefit managers (PBMs)—Cigna, CVS Health, UnitedHealth Group, Walgreens, and Walmart—now account for a record 77% of all relationships.
Read on for our latest analysis of this ever-expanding profit pool for pharmacies and PBMs. For a deep dive on what the 340B program’s growth means for drug channel participants, join Adam J. Fein, Ph.D., and Tyler Novotny on June 12 for a new live video webinar: 340B in 2026: Market Shifts, Policy Battles, and What They Mean for Stakeholders.
340BACKGROUND
Over the years, we have written extensively about the roles and profits of 340B contract pharmacies. For a comprehensive look into the 340B Drug Pricing Program, see Section 11.5 of DCI’s 2026 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.
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). Hospitals accounted for 87% of total 340B purchases in 2024.
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 2026, Drug Channels Institute examined HRSA’s Contract Pharmacy Daily Report, as published on May 18, 2026. 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. Because many chains and PBM-owned pharmacies appeared under multiple alternate names in the HRSA database, DCI standardized ownership classifications across entities.
340BOOM
Following the 2010 guidance change, 340B covered entities embarked on a rapid expansion of contract pharmacies. Here is a timeline of the 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-2026, DCI counted 31,593 unique 340B contract pharmacies. These locations make up nearly 60% of all U.S. retail, mail, long-term care, and specialty pharmacy locations.
However, the number of locations provides a misleading picture of the 340B contract pharmacy marketplace. That’s because a single contract pharmacy location can maintain 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 six covered entities.
For 2026, we found that these more than 31,500 pharmacies have 239,905 contractual relationships with 12,495 340B covered entities, i.e., there are almost 240,000 unique contract pharmacy/covered entity relationships. Despite the reduction in unique locations for 2026, the number of contractual pharmacy relationships grew by about 10,000 (+5%). Notably, this marks the second consecutive year in which relationship growth remained in the single digits, a meaningful slowdown from the 20%+ annual growth rate prior to 2022.
THE 340BIG FIVE
The chart below shows 2026’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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These are the key observations from our 2026 analysis:
- The largest five companies account for 77% of the contract pharmacy market. Consistent with our previous analyses, the five largest contract pharmacy participants are Cigna, CVS Health, UnitedHealth Group, Walgreens, and Walmart. 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. Nearly 90% of CVS Health retail locations have a contract with at least one covered entity, while 98% of Walgreens’ retail locations serve as 340B contract pharmacies. Other chains with a significant presence include Albertsons, Kroger, and Publix.
- Mail, specialty, and infusion pharmacy relationships from the three largest PBMs now comprise 26% of the 340B contract pharmacy market. Pharmacies affiliated with 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 more than quadrupled from 14,000 in 2020 to 62,000 in 2026.
Growth in relationships with federal grantees was a particularly important driver of year-over-year expansion. Notably, the top five companies have slightly fewer hospital relationships than they did last year.
- Market concentration continues to increase. 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 18%, from 52,613 relationships in 2017 to 239,905 in 2026. The top companies’ share has also soared during this period, from 57.0% of relationships in 2017 to 76.8% of relationships in 2026.
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- Some hospitals have built extraordinarily large pharmacy networks. Many covered entities have relatively small 340B contract pharmacy networks. However, some hospitals have built mega-networks. The table below summarizes information about the size of hospitals’ contract pharmacy networks in 2026:
- 156 hospitals (5% of 340B hospitals with contract pharmacies) account for more than one-third of all contract pharmacy relationships. These providers have built networks averaging 158 pharmacies.
- A further 302 hospitals (9% of 340B hospitals with contract pharmacies) account for 28% of all contract pharmacy relationships. These providers have built networks averaging 68 pharmacies.
Do hospitals truly require such expansive networks to serve vulnerable patient populations? Covered entities are not required to justify such large networks on the basis of access needs for uninsured, underinsured, and needy populations. Multiple peer-reviewed academic studies have identified issues with the location of the pharmacies within a covered entities’ networks. (See endnote 1067 in our 2026 pharmacy/PBM report.)
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340BROKEN
340B purchases are now more than 50% larger than Medicaid’s net prescription drug spending. The program now accounts for nearly one-fifth of the total U.S. gross-to-net bubble. See 340B Hit $81 Billion in 2024 (+23%): Why CMS and the IRA Are Poised to Cool the Program’s Runaway Growth.
340B contract pharmacies can earn margins that are well above what a third-party payer would usually provide. These profits flow to some of the largest public companies in the U.S., including the largest drugstore chains and PBMs. Covered entities are not prohibited from sharing program savings with pharmacies, as we illustrate in Follow the 340B Dollar: Senator Cassidy Exposes How CVS Health and Walgreens Profit as 340B Contract Pharmacies. Nephron Research estimates that the five largest contract pharmacy operators’ total estimated gross profits from the 340B program were about $3.4 billion in 2024.
Many of the biggest companies also own the third-party administrators (TPAs) of 340B contract pharmacies, enabling an additional profit stream. (For a list of TPAs and their ownership, see Section 11.5.4. of our 2026 pharmacy/PBM report.) Some of the vertically integrated insurer/PBM/pharmacy organizations have also acquired businesses that work with hospitals and health systems to provide specialty pharmacy services, further extending their reach into providers' 340B economics.
It's not all sunshine and rainbows between covered entities and these large companies. Three hospital systems have filed separate federal lawsuits accusing CVS Health and its affiliates of diverting 340B contract pharmacy savings.
Hospitals are investing more in their in-house specialty pharmacies. As we document in Specialty Pharmacy Accreditation: DCI’s Exclusive Analysis Reveals a Market at an Inflection Point, health systems and hospitals have emerged as the fastest-growing direct participants in the specialty pharmacy market by operating internal pharmacies. They are responding to changes in manufacturers’ policies regarding external 340B contract pharmacies by using vertical integration to internalize specialty pharmacy as a profit center and a strategic hedge.
As we have long argued at Drug Channels, the 340B program urgently needs modernization. Ultimately, Congress must address the structural flaws that have accumulated over the program’s 34-year history. The health-care system has changed a lot in the 34 years since the 340B program was introduced. Without meaningful reform, the program’s economic incentives will continue to favor scale, consolidation, and profit maximization over the original mission of supporting true safety-net providers and expanding access for low-income and uninsured patients.
After all, nothing says “safety net” quite like five publicly traded mega-corporations capturing 77% of all 340B contract pharmacy relationships.
For a fact-based, data-driven discussion of how we got here—and where the program may be headed next—tune in to 340B in 2026: Market Shifts, Policy Battles, and What They Mean for Stakeholders.
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