How health systems are saving money with centralized pharmacies

Modern Healthcare – Wednesday, August 27, 2025
By Caroline Hudson

A growing number of health systems are centralizing pharmacy services to capture millions of dollars in savings and build up those revenue streams.

Health systems are expanding facilities to bring drug inventory, fulfillment and distribution under one roof with the help of technology. The centralized model can cut down on medication and workforce redundancies, as well as mobilize one team to handle supply chain needs for dozens of care sites, system executives said.

“We’re seeing more systemization of hospitals, and as those systems form or mature, there are obvious opportunities for efficiencies, whether it’s financial or whether it’s for workforce,” said Michael Ganio, senior director of pharmacy practice and quality at the American Society of Health-System Pharmacists.

Centralization can also help systems navigate a rapidly evolving pharmaceutical industry amid crippling drug shortages and changes to federal policies such as the 340B program, said Michael Abrams, managing partner at consulting firm Numerof & Associates.

“There are safety requirements and a number of new regulatory changes that call for consistency and accountability in medication management, and so for all of those reasons, [centralization] is a good idea and likely to become better over time,” Abrams said.

Here’s a look at how four health systems are centralizing pharmacy services and why doing so made sense for their bottom line.

UVA Health

The University of Virginia Health is building a pharmacy central services center that will house inventory, supply management and prescription fulfillment for 10 ambulatory pharmacies, including a specialty and home delivery pharmacy.

The 40,000-square-foot center in Charlottesville, Virginia, will use robotics and a conveyor system to triple UVA Health’s fulfillment capacity. The site will also include a central call center that uses artificial intelligence and other technology to reduce wait times and support self-service platforms.

Danielle Griggs, chief pharmacy officer at UVA Health, said the center’s goal is to offload volumes and free up resources at individual pharmacy locations. She said many of the locations have outgrown their space.

UVA Health is trying to strategically grow its pharmacy service line because it drives a lot of value for the system, Griggs said. The health system wants to reach more patients with specialty medications, infusion therapies and home delivery options.

“As new medications are brought to market, new specialty medications are developed, we want to make sure that we have pharmacy services to support patients in all of their medication needs,” she said.

Griggs said the centralized model saves money by eliminating unnecessary duplicates of expensive drugs across care sites. She said the health system is estimating $1 million in initial savings.

Baptist Health

Louisville, Kentucky-based Baptist Health opened a $40 million, 102,000-square-foot shared pharmacy services center in mid-2024. The center houses inventory management, distribution, fulfillment and a call center. Baptist is planning to add compounding services in the next year or so, said Nilesh Desai, chief pharmacy officer of Baptist Health.

The center serves Baptist’s eight hospitals, 12 retail pharmacies, seven infusion centers, five surgery centers and more than 400 clinics.

Desai said the model was implemented to help navigate hundreds of drug shortages, economic uncertainty and pharmacy staff constraints, among other industrywide issues.

Desai said Baptist expects to recoup its investment in the center over the next decade, if not sooner. He said Baptist is saving money by cutting down on waste and making sure care sites have an appropriate number of doses of different medications.

Technology and automation are also driving savings. Desai said Baptist formed a partnership in 2023 with several vendors, including Medline and Cardinal Health, to develop a platform that supports centralized operations. Without technology, Baptist would have to hire dozens of people to manually sort and package medications, he said.

Using robotic infrastructure, the center has the capacity to fill up to 14,000 prescriptions per 10-hour production shift.

WVU Health

West Virginia University Health will expand its centralized pharmacy warehouse space by about 6,000 square feet by the end of the year. The warehouse is in a former Mylan pharmaceutical manufacturing facility the university purchased in 2022.

Morgantown, West Virginia-based WVU Health has worked to centralize drug repackaging and distribution, stockpile critical medications and use technology to identify potential shortages. The system is planning to centralize specialty pharmacy, home infusion and mail-order operations at the warehouse starting in 2026, said Todd Karpinski, chief pharmacy officer at WVU Health.

“There is a significant return on investment,” Karpinski said. “We can expand our product line. It expands our ability to store medications as well as create a larger operational footprint.”

Karpinski estimated the centralized model has generated about $1.2 million in year-to-date savings. He said WVU Health will be able to recoup its investment in the initial phases of the project within a couple of years.

Henry Ford Health

Detroit-based Henry Ford Health opened a $16.6 million centralized pharmacy services center in September 2023. The center includes a team to oversee how and where medications are used throughout the system, as well as a team to manage vendor contracts and payer agreements, said Rox Gatia, vice president of pharmacy shared services at Henry Ford Health.

The facility serves 43 outpatient pharmacies, a mail-order pharmacy, 13 hospitals and 17 infusion sites, not including sites from Henry Ford Health’s joint venture with Ascension Michigan.

Gatia pointed to industrywide challenges, including low reimbursement rates and pricing reforms, as driving the need for centralization.

“The headwinds and pressures that health systems are facing, particularly within the pharmacy aspect, are accelerating the call to action,” Gatia said. “We can’t do things incrementally and try to tackle each of these things as an individual headwind. We needed to basically go all-in and fully transform the way that we do business.”

Gatia said Henry Ford Health’s multiyear plan has involved building infrastructure to support the new operating model, taking on pharmacy services for ambulatory sites and implementing technologies such as automated dispensing cabinets at hospitals. The health system is also planning to centralize compounding.

Initial savings were estimated to be $30 million over five years, a spokesperson said.

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