Pharmacy and diagnostics: drugstores, drug distribution, labs and imaging

Lesson 3 of 3 Math checked Facts checked against sources on 1 October 2026 13 min

Pharmacy and diagnostics players, trends 2024 to 2026, and how to crack the cases

Who the players are by region, what changed from 2024 to 2026 (US pharmacy closures, middlemen under scrutiny, online pharmacies, cheaper generics in India, lab payment rules), typical prompts, traps and drills.

Industry brief, with a one-minute summary: Pharmacy and diagnostics

Firm processes and online tests change from year to year and differ by office. Use this to prepare, and confirm the exact current steps on the firm's own careers page.

Key takeaways

Pharmacy and diagnostics cases usually ask why a chain's profit is falling, whether to open or close stores or labs, whether to go online, or how to respond to a payment cut.
Common traps: Reaching for a generic framework instead of the real driver: in pharmacy that is gross profit per prescription and who sets it; in labs it is volume against fixed cost.
US drugstores shrank: Rite Aid filed for bankruptcy for the second time in May 2025, closed all its stores and moved prescription files from over 600 locations to CVS and other chains.
Calculate: gross profit per prescription by type, contribution per store, and for labs the contribution per test, breakeven volume and margin at expected volume.

Key idea

Pharmacy and diagnostics cases usually ask why a chain's profit is falling, whether to open or close stores or labs, whether to go online, or how to respond to a payment cut. The answer comes back to who pays, how much per prescription or test, and how full the fixed capacity (stores, pharmacists, labs, scanners) is.

Examples of pharmacy, distribution and diagnostics players by region (examples only, not a ranking)

Examples of pharmacy, distribution and diagnostics players by region (examples only, not a ranking)
Region	Pharmacies and online	Drug distribution	Labs and imaging
Global	AS Watson (health and beauty chains in Asia and Europe), Walgreens and Boots (now private)	McKesson, Cencora, Cardinal Health	Quest Diagnostics, Labcorp, Sonic Healthcare, Synlab, Unilabs; machine makers Roche, Abbott, Siemens Healthineers
United States	CVS, Walgreens, Walmart, Kroger, Amazon Pharmacy; PBMs CVS Caremark, Express Scripts, OptumRx	McKesson, Cencora, Cardinal Health	Quest Diagnostics, Labcorp, RadNet (imaging)
Europe	Boots (UK), many pharmacist-owned shops; online Redcare Pharmacy and DocMorris	Phoenix, Alliance Healthcare, Sanacorp	Synlab, Unilabs, Cerba, Sonic Healthcare's European labs
Middle East	Nahdi and Al-Dawaa (Saudi Arabia), Aster and Life Pharmacy (UAE)	Large local distributors and the chains' own warehouses	PureHealth labs (UAE), Al Borg Diagnostics, hospital groups
India	Apollo Pharmacy, MedPlus, Tata 1mg, PharmEasy, Netmeds; government Jan Aushadhi stores	Thousands of stockists; chains' own supply arms	Dr Lal PathLabs, Metropolis, Thyrocare, Agilus, Redcliffe Labs
Southeast Asia	Watsons, Guardian, Mercury Drug (Philippines), Kimia Farma (Indonesia)	Zuellig Pharma, DKSH	Pathlab and Innoquest (Malaysia), Prodia (Indonesia), Hi-Precision (Philippines)

So-what

In the United States, a few groups own the pharmacy, the middleman and sometimes the insurer. Elsewhere, pharmacies are more scattered and regulated, and chains are still gaining share.

Size and margin of some large players, latest full year (USD; years end in different months)

Size and margin of some large players, latest full year (USD; years end in different months)
Company or segment	Revenue	Margin
McKesson, drug distribution (year to March 2026)	USD 403.4 billion, up 12 percent	Gross margin about 3.6 percent; operating margin about 1.5 percent
CVS Health, pharmacy and retail segment (2025)	USD 139.4 billion, up about 12 percent	Adjusted operating margin about 4.3 percent
Quest Diagnostics, labs (2025)	USD 11.04 billion, up 11.8 percent	Operating margin about 14.1 percent

So-what

The further a business sits from simply moving boxes, the higher its margin: distribution earns a percent or two, a pharmacy chain about four, a lab about fourteen.

Trends 2024 to 2026 (checked 1 October 2026)

US drugstores shrank: Rite Aid filed for bankruptcy for the second time in May 2025, closed all its stores and moved prescription files from over 600 locations to CVS and other chains. Walgreens Boots Alliance was taken private by Sycamore Partners on 28 August 2025 for USD 11.45 a share in cash (plus a right to up to USD 3 more), and its five businesses (Walgreens, The Boots Group, Shields Health Solutions, CareCentrix and VillageMD) now run as separate standalone companies.
Volume moved to the survivors: CVS filled 5.4 percent more prescriptions in 2025 (about 1.81 billion on a 30-day basis), helped by the Rite Aid files, while reporting continued pressure on what payers pay per prescription.
Expensive specialty medicines swelled distributors: McKesson's revenue rose 12 percent to USD 403.4 billion in its year to March 2026, and its oncology and multispecialty business grew 31 percent, helped by acquisitions.
Middlemen under scrutiny: the US Federal Trade Commission reported in July 2024 that the three largest PBMs processed nearly 80 percent of the about 6.6 billion prescriptions filled in the United States in 2023, and the six largest more than 90 percent.
Germany's pharmacies keep closing while online grows: there were 16,488 pharmacies on 30 June 2026, down 113 in six months, according to the pharmacists' association ABDA. Electronic prescriptions became mandatory on 1 January 2024, which let online pharmacies fill them; Redcare Pharmacy's prescription sales in Germany rose 191 percent in the first quarter of 2025.
India pushes cheap generics: the government's Jan Aushadhi stores, which sell generic medicines at much lower prices than branded ones, grew from about 84 in 2014 to more than 19,200 in 2026. Chains and online pharmacies are also gaining on small chemists.
Labs grow by buying: Quest's revenue rose 11.8 percent in 2025, but organic test orders grew only 3.4 percent; most of the rest came from buying other lab businesses. In the United States, Congress again delayed cuts to Medicare lab payments in February 2026, to 2027.

Pharmacy and diagnostics case prompts, the structure to use, and the first driver to check

Pharmacy and diagnostics case prompts, the structure to use, and the first driver to check
Prompt	Structure hint	First driver to check
A US pharmacy chain's profit fell 20 percent while sales rose. Why?	Profit per script by drug type, script volume, front of store, store costs	Reimbursement per generic script and the shift to expensive brands
Should a Saudi pharmacy chain open 200 more stores?	Store economics: catchment, scripts per store, ramp-up, insurance coverage, rivals	Prescriptions per store and the payback of a new store
Should an Indian lab chain match a rival's 20 percent price cut?	Lab profit: contribution per test, volume, fixed costs, test mix	Contribution lost against volume needed, by test type
A European pharmacy group wants to go online.	Channel: prescription rules, delivery cost, cannibalisation of stores, trust	Which prescriptions may be filled online and the cost per delivery
How should a hospital group run its imaging centres?	Capacity: scanners, hours, referrals, staffing, payer mix	Scans per scanner per day against capacity

So-what

Ask who pays and how much per script or test, then how full the fixed capacity is.

Using this in a case

Ask: who pays (insurer, government, middleman, patient) and how the price is set; the mix of generic, branded and front-of-store sales; for labs and imaging, the volume, the test mix and the share of capacity used.
Calculate: gross profit per prescription by type, contribution per store, and for labs the contribution per test, breakeven volume and margin at expected volume.
Say: link the number to the decision. For example, "Sales grew on expensive brands, but generic reimbursement fell USD 2 per script, which removes about a quarter of prescription profit. I would focus on services and cost to fill, not on more branded volume."

Common traps

Reaching for a generic framework instead of the real driver: in pharmacy that is gross profit per prescription and who sets it; in labs it is volume against fixed cost. Reading sales growth from expensive brands as profit growth. Ignoring the payer: in the United States the PBM, in Europe the law, in India the patient's own pocket. Assuming online is cheaper without counting delivery and the rules on prescriptions. Matching a price cut in a lab without working out the extra volume needed. Giving medical advice instead of business analysis.

Read the brief and related industries

The pharmacy and diagnostics brief puts this industry on one page. Medicine makers and hospitals and insurers have their own briefs.

Pharmacy and diagnostics brief

Same pattern elsewhere

Pharmacies and distributors follow the scale retail pattern: thin margins, volume and stock turns. Labs and scanners follow the utilization pattern, like airlines and hotels.

The utilization pattern

Timed math drill

In the United States in 2024, generics and biosimilars were about 90 percent of prescriptions but about 12 percent of spending. If all medicines cost USD 100 billion in total across 1 billion prescriptions, what was the average spend per generic prescription, in USD?

Check your understanding

A chain wants to close 10 percent of its stores and move their prescriptions to nearby stores. What is the key thing to estimate?

Terms in this lesson

Market share Vertical integration Economies of scale Switching costs Capacity utilization Synergy Last mile

Sources for this lesson (12)

My notes on this lesson

Write anything you want to remember. Only you can see it.

0 of 5,000 characters. Saves automatically.

Try the 2 remaining checks and drills above to complete this lesson (0 of 2 done).

Spotted something wrong or out of date? Report a mistake. We check every report and correct the page.