GAO Report Found Medicare Part D Pharmacy Market Shift
Vertically integrated plans have captured significant market share, creating cost disparities for retail operators.
Updated on Oct. 5, 2026 in Healthcare
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A new GAO report reveals that four major Medicare Part D plan sponsors, which accounted for over 40 percent of total enrollment in 2023, now own pharmacies that manage a significant portion of drug distribution. These vertically integrated entities control 28 percent of total pharmacy payments, impacting how prescription drugs reach 54 million beneficiaries.
Why it matters
This concentration of market power creates structural incentives for patients to favor mail-order services over local retail pharmacies through lower cost-sharing requirements. For independent pharmacy owners, this integration represents a shift in competitive dynamics as plan-owned entities secure preferred payment rates on common medications.
Four large plan sponsors owned pharmacies that accounted for 28% of total pharmacy payments in 2023, compared to their 24% share of overall drug utilization. Medicare Part D spending reached $150 billion for 54 million beneficiaries in 2025.
The players
GAO
The Government Accountability Office serves as the non-partisan audit and investigative arm of the U.S. Congress, providing oversight on federal programs and financial management.
Medicare Part D
The federal program provides prescription drug coverage to millions of beneficiaries, operating through a network of private plan sponsors that negotiate with pharmaceutical manufacturers and pharmacies.
The details
Vertically integrated plan sponsors utilize mail-order channels to dispense prescriptions, creating a direct pipeline that bypasses traditional retail points of sale. Because plan-owned pharmacies offer lower cost sharing to patients for 94 percent of top-utilized drugs, they effectively steer volume away from independent community pharmacies. This creates a margin squeeze for retail providers who cannot compete with the internal pricing structures maintained by these larger, integrated plans.
Timeline
The GAO analyzed drug utilization and payment data throughout 2023.
Medicare Part D recorded $150 billion in total drug coverage expenditures during 2025.
The official GAO report was published on October 5, 2026.
Market Landscape
This report highlights a shift in the pharmacy delivery model long after the initial implementation of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. It reflects a growing industry trend toward vertical integration where plan sponsors exert greater control over the pharmacy benefit and distribution chain.
Retail pharmacy operators should monitor how plan-specific steering mechanisms impact their patient volume and reimbursement rates. Business owners must evaluate if their current payer contracts remain sustainable given the pricing advantages held by vertically integrated competitors.
The takeaway
The data highlights how plan-sponsored pharmacies are successfully steering volume through pricing incentives that local retailers cannot easily match. Owners should review their specific contracts with Medicare Part D sponsors to identify which drugs or service tiers are most susceptible to competitive pressure from these integrated entities.
Further reading
Explore more analysis regarding pharmacy benefits and coverage in our Healthcare section.
Source note: This article includes information reported by Firstwordpharma.
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