Pharma working capital feels the weight of GLP-1 boom
Pharmaceutical companies tied up significantly more cash in inventory in 2025 as demand for specialty drugs and investment in new manufacturing capacity helped drive another year of growth for the industry.
The pharmaceutical industry’s cash conversion cycle increased 10% in 2025 to nearly 186 days, up about 17 days from the prior year, according to The Hackett Group’s 2026 North American Working Capital Survey, which analyzed the largest U.S. 1,000 nonfinancial public companies’ financial results last year. Days inventory outstanding increased by nearly 16 days to 251.5 days, making inventory the biggest contributor to the deterioration among pharmaceutical companies.
The numbers provide a look at the working capital implications of a pharmaceutical market experiencing continued demand for specialty drugs and increased investment in manufacturing capacity. Hackett specifically cited biologics-driven inventory buildup as a contributor to the industry’s growing working capital requirements, while capital expenditures increased 15.3% as companies invested in R&D manufacturing for biologics, GLP-1s and oncology and capacity expansion.
Pharmaceutical revenue increased about 7.7% to roughly $480 billion in 2025, while net income rose about 77.5%, according to Hackett. The firm attributed the industry’s growth and profit recovery to specialty drugs and innovation amid continued demand for patented drugs and biologics.
The pressure of inventory
Inventory remained the biggest drag on pharmaceutical companies’ working capital performance in 2025.
DIO increased from 235.6 days in 2024 to 251.5 days in 2025, adding nearly 16 days to the industry’s cash conversion cycle. Hackett said Amgen “illustrates” the inventory pressure created by the long production and inventory cycles typical of biologics and specialty pharma, while Pfizer’s changing product mix and demand normalization have increased pressure on inventory management.
Damon Rottermond, director of finance transformation at The Hackett Group, said during an interview with CFO.com that the industry’s changing drug mix is contributing to those longer inventory cycles.
“I think part of it also is switching from some of those traditional drugs to gene therapies, which have longer lead times, which require them to hold more inventory there. So I think that drove DIO up partly as well,” he said.
Supply-chain changes are adding another layer of complexity, as Hackett said a large share of active pharmaceutical ingredients and drug components remains concentrated in Asia, particularly India and China, while drugmakers are expanding U.S. manufacturing capacity as they try to reduce their dependence on offshore supply routes.
“DIO has gone up so they’re really impacted by the shift in the supply chain,” Rottermond said. “A lot of them are also moving to China plus five, India as well, so that’s impacting them as well, and then we also had the impact of the tariffs. That’s a key piece of the pharma story.”
Pharmaceutical companies also faced more pressure from receivables in 2025, as days sales outstanding increased from 70.4 days to 75.7 days, adding about five days to the cycle. Days payable outstanding provided some relief, increasing about four days to 141.4 days, though the benefit was not enough to compensate for the combined pressure from inventory and receivables.
The result was another year of deterioration in pharma’s cash conversion performance. The industry’s CCC increased from 168.7 days in 2024 to 185.8 days in 2025, even as revenue and profitability improved substantially.
Drug demand creates a complicated equation
The demand environment that is fueling the working capital situation pharma has found itself in continues to evolve, particularly around those high-cost specialty drugs and lately in GLP-1 medications.
Bank of America said this month that the bank now spends more than $250 million annually providing GLP-1 medications to employees, up from almost nothing five years ago. This new expense accounts for roughly 13% of the more than $2 billion the company spends annually on healthcare for its approximately 211,000 employees.
Employers, regardless of industry, expect that demand to continue growing. In a recent Business Group on Health survey of 105 employers conducted earlier this year, 87% said they expect the availability of new oral GLP-1 medications to increase overall demand.
The expense is also forcing some CFOs to reconsider how much of that demand they are willing to finance. Among employers covering GLP-1 medications for weight management, 72% told Business Group on Health they were likely to continue doing so in 2027, while 10% said they likely would not.
Mercer found similar signs of cost pressure in its recent survey on health and benefit strategies for 2027 when it reported that prescription drug benefit costs are expected to increase about 9% in 2026. Only 6% of large employers dropped GLP-1 weight-loss coverage this year, while another 5% plan to drop coverage in 2027 or are considering it. Another 27% have tightened utilization controls or plan to do so.
The cost pressure facing employers is not limited to GLP-1s, with PwC expecting the average cost of providing group healthcare to employees to rise 9% in 2027 for the second consecutive year as specialty drugs, higher provider reimbursement and increased healthcare utilization continue to push costs higher. More than 85% of health plans surveyed by PwC expect pharmacy costs alone to rise faster than the overall medical cost trend.
