In the ongoing discussion about the rising cost of prescription drugs, there’s been a lot of focus on insurers, pharmacy benefit managers, and retail pharmacy chains. These are the known “middlemen” in our complicated drug supply chain, and they have drawn intense scrutiny from regulators, lawmakers, and consumer advocates. But a new study in the New England Journal of Medicine looks at another group of powerful intermediaries that has quietly amassed vast influence, while managing to avoid public scrutiny.
Pharmaceutical wholesalers, namely McKesson, Cardinal Health, and Cencora (formerly AmerisourceBergen), are drastically reshaping the healthcare landscape. These three companies now control 98 percent of the drug market and are not simply distributing medications. They are buying the practices that prescribe them.
The study’s authors, healthcare policy experts from Washington and Brown universities, note, “In recent years, wholesalers have engaged in multibillion-dollar acquisitions of medical practices, which they control by means of corporate entities known as management-services organizations (MSOs).”
McKesson owns U.S. Oncology, the largest oncology-practice network in the country, and last year acquired additional oncology practices. In 2023, Cencora purchased a minority stake in OneOncology. Meanwhile, in 2024, Cardinal Health acquired Integrated Oncology Network. In the past two years, the wholesalers’ MSOs have acquired hundreds of practices specializing in ophthalmology, urology, gastroenterology, and rheumatology practices. And nothing is stopping them from expanding into other specialties.
Unlike pharmacy benefit managers (PBMs), wholesalers operate earlier in the supply chain, purchasing drugs from manufacturers and selling them to pharmacies and practices. That role should make them key players in ensuring fair pricing and efficient delivery. Instead, their growing reach into medical practice ownership raises troubling questions about conflicts of interest and the potential for abusive business practices.
Wholesalers that own practices can steer patients toward drugs that maximize their own profits. As the article states, “studies generally haven’t found an association between vertical integration in health care and savings for consumers… This ‘captive’ model of competition is less about cost containment — which depends on wholesalers competing for medical practices’ business — than about selectively integrating throughout the supply chain to capture margins at each point.”
Even more importantly, by controlling purchasing, inventory, and workflows through MSOs, they can influence physician decisions in ways that may undermine quality care, threatening to reduce treatment to a series of corporate financial calculations.
There are also serious legal and regulatory concerns. Tightly integrated networks of wholesalers, group purchasing organizations, and MSOs blur the lines between supplier and provider. Either existing laws and regulations need to be applied or new policies must be developed to prevent self-dealing and protect patients from financial conflicts. If a wholesaler effectively controls a physician’s practice and pharmacy, it may be effectively impossible for that physician’s judgment to remain unclouded from economic self-interest.
You have likely already noticed this trend, with your previously independent physician now part of a hospital or larger medical group owned by some private equity player. Smaller practices face immense administrative and financial burdens making selling to a corporation seem like the only viable path for survival.
But policymakers must look into this ownership structure. Wholesalers that distribute drugs and own the practices that prescribe them are especially conflicted. Their ability to influence every step of the supply chain gives them unmatched power to shape prices, squeeze competitors, and undermine the independence of medical professionals, none of which benefits patients.
Other links in the pharmaceutical supply chain, such as PBMs, have attracted a lot of regulatory attention with claims they are driving up prescription costs. But little to no energy has been spent exposing wholesalers who, the article notes, “increase costs and threaten clinicians’ autonomy.” Federal and state authorities should not let these entities continue to fly under the radar.
What is at stake is market efficiency, consumer prices, and even the quality of medical care itself. When corporate interests penetrate the exam room, patient care risks becoming secondary to shareholder profit. To achieve a system where physicians make decisions based on clinical judgment and care is delivered in patients’ best interests, regulators must confront the growing power of wholesalers and bring transparency and accountability to this overlooked player in the prescription drug industry.
