Pharmacy IT: Expanding Challenges, Accelerating Adoption

The pharmacy services sector is growing rapidly due to an aging population in need of prescriptions, a higher prevalence of chronic diseases, continuing development of new therapies and specialty drugs, and increasing treatment options for patients and caregivers. In fact, the U.S. market is expected to expand from $560 billion in 2021 to $862 billion by 2028.¹

Source: U.S. Census Bureau; Advisory Board: Infusion Market Trends

Relatedly, these factors are amplifying the need for integrated technologies that address pharmacy provider challenges while improving patient care and financial outcomes. And due to historically low technology use within pharmacy services, there's significant potential for leading software solutions to take share.

In this article, senior professionals from our Healthcare & Life Sciences Group discuss why the pharmacy IT market presents many opportunities for investors to add value to the pharmacy value chain and broader healthcare ecosystem.

Compounding Complexities

The pharmacy landscape continues to evolve and become more complicated, making technology investment a higher priority. The Federal 340B Drug Pricing Program, for instance, is bolstering the quantity of drugs dispensed to patients through contract pharmacy services.

Source: USC Leonard D. Schaeffer Center for Health Policy & Economics; Health Resources and Services Administration

Meanwhile, as payers push for a shift from hospitals to alternative sites of care, coordination is more critical between payers, providers, and pharmacies across the patient care continuum. Specialty pharmaceutical growth is also challenging pharmacies’ capacity to fill and distribute an increasing number of prescriptions.

“The confluence of these trends is adding volume, scope, and complexity that pharmacy providers must absorb,” says Paul Hepper, a managing director. “To solve these obstacles, providers are leveraging high-ROI technology that streamlines workflows, automates time-consuming tasks, and improves medication adherence.”

Amid these dynamics, there is a worsening shortage of pharmacists and pharmacy technicians. Enrollment in pharmacy school programs has dropped every year since 2017², creating competition for pharmacy staff and heightening the need for pharmacy efficiency.

Source: American Association of Colleges of Pharmacy, 2022

“While the pharmacy sector has been slow to adopt new technologies, industry challenges have spotlighted the many benefits of IT solutions,” says Dan Linsalata, a managing director. “Pharmacy IT is now a necessity to improve both patient care and financial outcomes.”

Six Areas to Watch

Below are six key pharmacy IT categories that are vital for optimizing pharmacy services, each offering substantial investor momentum and opportunity.

Pharmacy Management Software: Software used by pharmacists and pharmacy employees to support essential pharmacy operations, such as processing prescriptions. Other functionality includes integrated point of sale, inventory and ordering, mobile apps for patient engagement, claims processing, pharmacy workflow management, and data reporting.

Reporting and Data Analytics: Tools that facilitate data-driven decision-making through insights into pharmacy performance, inventory trends, and prescription patterns.

Patient Engagement and Medication Adherence: Solutions for maintaining patient profiles, tracking medication adherence, and managing patient communication.

Inventory Management/Dispensing and Automation: Software that tracks and manages pharmaceutical inventory to optimize stock levels, minimize waste, and prevent expired stock. Electronic automation entails the distribution, sorting, packaging, and counting of prescription medications.

Specialty/Infusion Software: Specialized technology that improves workflow efficiency, ensures accurate medication administration, and enhances patient care coordination. Key features include patient management, order entry, inventory tracking, billing, and compliance functionalities.

340B Management: Software and services that help pharmacies effectively manage participation in the Federal 340B Drug Pricing Program, ensure adherence to 340B program regulations, and aid pharmacies in maximizing the benefits of program participation.

Multiple Avenues for Growth

Given the many dynamics at play in the pharmacy sector, technology adoption is accelerating among pharmacy operators. While the pharmacy IT market is growing quickly, it remains highly fragmented, offering numerous paths for creating value and building platforms of scale.

“Leading technology companies are establishing a strong advantage by bringing efficiency, integration, and coordination to pharmacy providers,” says Hepper. “The IT solutions that can connect the entire life of a prescription will be highly sought after.”

To discuss emerging trends and M&A opportunities within pharmacy IT, please contact our senior professionals.

1. iARx; “3 Signs the Pharmacy Ecosystem is Poised for a Movement”

2. American Association of Colleges of Pharmacy, 2022