For more than a decade, the answer to “Where do drug wholesalers make their money?” has been generic drugs.
Although wholesaler revenues are linked most closely to sales of brand-name drugs, the majority of wholesalers’ gross profits comes from generic drugs. We estimate that in calendar year 2026, generic drugs will contribute 52% of total drug distribution gross profits of the Big Three wholesalers, but only 9% of drug distribution revenues.
Generic drugs are the long-running hit show that has carried wholesalers' profits for 15+ seasons. The show is still on the air, but a supporting character is starting a spinoff.
Generic drugs’ share of distribution gross profits has declined, from 68% in 2022 to 52% in 2026. This partially reflects the growth in profits from provider-administered biosimilars. Biosimilars now account for 6% of wholesalers’ drug distribution revenues, but 23% of total gross profits.
Below, we preview data from our forthcoming 2026–27 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors to trace how the biosimilar category is standing out as wholesalers’ second profit engine.
THE ORIGINAL SERIES
Drug wholesalers earn their drug distribution revenues and gross profits from different places. Brand-name drugs generate most of the revenue. Generic drugs generate the highest gross margins.
As we explain in Section 4.5.1. of our forthcoming 2026-27 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors, the generic dispensing rate has plateaued at around 90% of prescriptions. Fewer major traditional brand-name drugs will lose exclusivity and face generic competition. Consequently, wholesalers will have fewer opportunities than they have had over the past two decades to benefit from the high margins of generic launches.
With generic drugs already accounting for 9 out of 10 prescriptions, consistent price deflation, and overall fewer gross profit dollars, it makes sense to focus on categories with more upside. Just imagine if the producers of Breaking Bad tried to extend the series after season 5's peak influence in the zeitgeist.
THE RATINGS ARE IN
Let’s look at how that has shifted the profit mix for wholesalers.
The charts below compare the Big Three wholesalers’ revenues and gross profits by type of drug for 2022 and 2026. The 2026 figures come from Exhibit 98 in DCI's 2026-27 wholesale report and the 2022 figures come from the comparable exhibit in our 2022–23 edition.
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Provider-administered biosimilars doubled their share of revenues and more than doubled their share of gross profits.
In dollars, we estimate that biosimilars’ gross profit contribution more than tripled, from $1.4 billion in 2022 to more than $4 billion in 2026, while generic gross profit dollars were flat to slightly lower. The Big Three's total drug distribution gross profits grew from $15.9 billion to $20.2 billion over the period, so biosimilars accounted for about 70% of that growth.
The biosimilar gross margin sits between the brand-name and generic figures. For 2026, we estimate wholesalers’ gross margin at 8.2% for provider-administered biosimilars, compared with 12.5% for generic drugs. Exhibit 97 in DCI's 2026-27 wholesale report provides more detail of our estimates by drug and customer type.
The higher margin for lower-priced products reflects a core economic reality of distribution: A wholesaler’s operating costs do not differ among individual drugs that have comparable physical characteristics but different prices. For example, a wholesaler’s physical distribution costs do not vary whether a drug is $3.00 per pill or $0.03 per pill.
A higher gross margin percentage compensates a wholesaler for the lower base price and wholesalers have generally been successful at adjusting their contracts when prices change. That includes when a brand manufacturer drops the WAC price as many have done the last couple years.
OUTSTANDING SUPPORTING MOLECULE
The market and competitive dynamics of provider-administered biosimilars enable wholesalers to achieve buy-side gross margins percentages that are generally higher than brand-name drugs, but lower than generic drugs.
This is primarily driven by two factors:
Differences in list prices. The marketed provider-administered biosimilars have wholesale acquisition cost (WAC) prices that are typically 10% to 25% below the WAC price of their corresponding reference product. Consequently, a wholesaler would earn fewer dollars for each biosimilar unit utilized in place of the reference product. As we described above, wholesalers commonly negotiate distribution fee rates that offset the effect of lower list prices.
Ability to influence biosimilar selection. A growing number of biologic drugs now have multiple biosimilar versions. This direct competition has allowed wholesalers to extract additional fees from biosimilar manufacturers. It has also enabled group purchasing organizations (GPOs) owned by wholesalers to negotiate greater discounts and rebates on behalf of their provider members.
Wholesalers can use pricing and availability in an attempt to influence a provider’s selection of one manufacturer’s biosimilar drug over another manufacturer’s version. This impact is greater on physician practices that also participate in the GPOs owned by wholesalers. Wholesalers’ ownership interest in physician management services organizations (MSOs) may also increase their ability to influence the selection of a particular biosimilar. The ownership of GPOs and MSOs also allows wholesalers to earn multiple profit pools from each sale, so the profit from provider-administered biosimilars is about more than just the distribution gross profits.
Over the past few years, payers have altered their strategies to favor biosimilars and remove restrictions on provider choices. Many major biological reference products have now lost a majority of their unit sales to their biosimilars. The chart below appears as Exhibit 162 in DCI's 2026-27 wholesale report and shows biosimilars now hold 61% to 93% of unit volume for these selected products, up from 15% to 68% in 2020.
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NOTES FROM CRITICS
Despite the growing competition in provider-administered biosimilars, three limits keep biosimilars from generating generic-level profit for wholesalers.
1. Biosimilars are neither discounted nor stocked like generics. The price differential for biosimilars vs. the reference product are smaller than for generics. In addition, wholesalers must generally stock the innovator biologic reference product along with every biosimilar version, whereas they can typically limit generic inventories to products from one or two of the multiple manufacturers in the market.
2. Wholesalers’ influence has limits. A wholesaler cannot credibly threaten to exclude a biosimilar, because that product may have coverage at one or more health plans. Wholesalers’ influence is greatest when a reference drug has multiple biosimilars, payers have not mandated a specific product, and providers have no financial disincentive to use biosimilars. These conditions are not yet fully present in the marketplace for provider-administered biosimilars.
3. Biosimilars of patient-administered biologics such as Humira and Stelara have not benefited wholesalers in the same way. Instead, patient-administered biosimilars reduce wholesalers’ revenues and alter channel economics, where the vertically integrated PBMs capture more of the economics. We covered how PBMs are harnessing vertical integration in the Stelara biosimilar market in The Stelara Biosimilar Price War: How PBM-Affiliated Private Labels Are Reshaping the Market.
RENEWED FOR ANOTHER SEASON
Consistent with our previous analyses, we expect that wholesalers’ influence over provider-administered biosimilars—and buy-side compensation from those products’ manufacturers—will grow.
We also expect the provider-administered biosimilar profit pool to keep growing. The biosimilar market continues to expand, so wholesalers’ ability to influence product selection continues to grow, along with their ability to generate more profit related to biosimilars across the drug channel through their ownership of GPOs and MSOs.
Generics still carry the show, but biosimilars are the reason the network renewed it for another season.
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