Across ophthalmology and retina specialty, consolidation and vertical integration are no longer emerging trends; they are defining the competitive landscape. Over the past decade, physician practices across the US have been steadily moving away from independent ownership, with less than half of physicians now working in private practice, down from 60% in 2012. In Retina specifically, this trend seems to be driven primarily by an aging owner/physician population. Conversely, many newly trained retina specialists just completing their fellowships prefer to establish their own independent practices rather than join distribution-owned or PE-backed groups (1).

General ophthalmology has held onto independence longer than many other specialties, with roughly 70% of physicians still in independent settings. But that is now beginning to change. The field remains highly fragmented, with more than 13,000 eye care practices nationwide, making it an obvious target for consolidation and scale-driven models.

That shift is already happening – between 2011 and 2024, more than 550 ophthalmology and optometry practices were acquired, with activity largely centered around larger, multispecialty groups.

For independent practices, the market presents a larger opportunity to expand business lines into subspecialties, such as Retina and Retina research, or to grow organically from the small Retina footprint they have today. This is a more attractive model for those coming out of Retina fellowships than in the past. Many of the business challenges facing Retina have been solved in general ophthalmology, and many best practices in both complement each other.

For practices that want to remain independent, understanding how to build and capitalize on a sound drug strategy is critical to sustaining practice profitability.

Benefits of drug management for independent practices

In retina practices, for example, drugs are the highest cost but also offer the highest return on investment. Accordingly, understanding drug strategy means understanding profitability. It is therefore imperative that a practice’s drug management — the group purchasing, ordering, storage, prescribing, and dispensing this medication – be as efficient and mistake-free as possible. Practices rely heavily on their group purchasing organization (GPO) and specialty distributor (SD) partners for drug management solutions, but many are not getting the maximum benefit from these arrangements.

The traditional business models of large legacy GPOs and SDs have not adjusted to the new realities of rising drug costs, biosimilar alternatives, and payer pressures. The result?

Too many practices are locked into a framework that does not offer flexibility, transparency, or real-time data and insights. Many are unaware that their current contracts may put them at a strategic and fiscal disadvantage. One example of this is a customer who is locked into a multi-year agreement in an environment where many biosimilars have yet to launch, thus making it difficult to renegotiate a contract already enforced with set prices. This is one way how distribution margins begin to creep upward and practice margins creep downward. 

Independent practices need more from their drug management partners. They require a new approach, one that delivers the maximum financial benefit, as well as end-to-end transparency into the drug management, discount, and performance rebate processes.

Here is a look at what a more modern GPO/SD partnership should include:

The four necessities of smarter drug management

1. Flexible contracts that put the practice first

Practices should look at more than just numbers when comparing pricing. They should avoid one-size-fits-all deals in favor of contracts adapted for their specific needs. An example of this is a distribution contract that begins and ends in the middle of a quarter. Most distributors do this knowing that it creates a challenging transition in the middle of a performance quarter with manufacturer rebates; it is a sales tactic to retain business at the expense of the practice.

Contracts should include such features as increased clarity around pricing components like Wholesale Acquisition Cost (WAC), Average Sales Price (ASP), purchase price, and rebates; tools to directly compare pricing when evaluating distributor options; and shorter contracts with annual reviews that support changing practice dynamics. A best practice for comparing pricing is to quiet the noise and compare net cost recovery per unit between competing distributors. The math is simple: your reimbursement from payer and patient minus your distribution price, then adding back any performance rebates from manufacturers and distribution partners.

Other desirables include distribution features that avoid unattainable incentives or backloaded “gotchas;” models that support diversity, whether a single-site retina specialist or a multi-specialty group; and annual pricing audits and proactive quarterly reports to ensure margins are transparent.

2. Intelligent inventory management

Practices need a smarter drug management system with predictive suggestions and task automation. It should be a single source of truth that integrates inventory, EMR, and revenue cycle data.

This includes systematic step therapy and prior authorization workflows that reduce denials and delays, as well as tools that go beyond tracking inventory to mitigate shortages and help to better manage working capital.

Practices should demand AI technology that learns from usage patterns and informs predictive ordering from patient schedules and current inventory levels, keeping inventory on hand less than five days. Of course, the practice workflow remains under clinician control to ensure that medical decisions drive logistics.

3. Visibility from purchase to payment

Given the buy-and-bill nature of practices, to improve drug management, practices need insight into the entire process, from purchase to payment. Seeing the full financial lifecycle of each vial is critical. As such, practices need analytic capabilities in the following areas:

• Real-time KPI dashboards that track from order to reimbursement without waiting for nightly or even weekly batch updates

• Drug-level net cost recovery data showing exactly what the practice is earning per vial

• Instant access to trusted data and end-of-quarter decision support to optimize contract performance

• Transparent rebate tracking with clear calculation breakdowns, status visibility, and prompt payment of rebates

• Proactive modeling tools to simulate the impact of GPO contract term changes before implementation

4. A trusting partnership

The most successful GPO and SD relationships are based on trust earned through openness and results. A great GPO knows their practice’s strategy and aligns manufacturer goals with practice opportunities. Too often, practices think that they can only get the off-the-shelf contract opportunities or aggregate group offering. Seek partners that can offer a dynamic drug pipeline, which means every practice has something to leverage in their favor.

Practices should have access to a dedicated, specialized team of experts in drug management that understand the challenges of operating an independent practice. These are strategic partners, not vendors, who proactively share advice and information, as well as listen and build solutions and offerings geared to specific needs.

They don’t lock practices into rigid frameworks but provide the autonomy that allows them to choose the products and partners that best serve them. They deliver personalized service with greater insight into distributor pricing and GPO rebates. They offer education and tools that help practices adapt to market changes and implement innovative approaches as practices’ needs evolve.

Strengthening the path forward

When independent practices modernize their drug management strategies and demand more from their GPO and specialty distributor partners, they build a stronger financial foundation, protect their autonomy, and take greater control of their future.

And despite what the market may suggest, with the correct drug strategy in place, an independent practice is fully capable of outperforming its PE-backed or distributor-owned counterparts.