Trends in Pharmacy Vehicle Expenses

Over the past five years, pharmaceutical companies have faced rising mobility demands, some without a corresponding increase in resources. Sales reps are on the road more than ever, covering large territories, responding to fluctuating healthcare needs, and navigating an increasingly competitive market. As in other healthcare segments, these companies are learning to do more with less. One area under the microscope is vehicle expense management, a cost category that has quietly but steadily grown and is now being reevaluated with new urgency.

A Measured Rise in Costs

Vehicle expenses in the pharmaceutical sector have grown moderately over the past five years, generally tracking with inflation. Most organizations have seen an increase of around 4-6% during this period, a figure consistent with trends across the broader healthcare field. Rising car prices, insurance premiums, and fuel costs, particularly during the inflation spikes of 2022–2023, contributed to this uptick in spending (https://cardata.co/blog/hybrid-tax-free-mileage-reimbursements-programs/).

Why Traditional Programs Are Falling Short

Historically, pharmaceutical companies relied heavily on fleet vehicles or flat allowances to handle employee mobility enablement. However, both models have proven increasingly expensive and inefficient over time. Fleets come with significant overhead: acquisition, depreciation, maintenance, insurance, and compliance. Company-owned vehicles also expose firms to liability risks, especially when reps use them for personal errands, a scenario that may require costly insurance policies (https://cardata.co/blog/fleets-company-cars-vs-favr-reimbursement-programs/).

Flat allowances, while simpler to administer, are always taxable when not substantiated, reducing their value to employees and increasing payroll tax exposure for employers. For example, a $600 monthly allowance can lose over 30% of its value to taxes, depending on the employee’s bracket. Additionally, flat rates rarely account for differences in geography, fuel prices, or vehicle types, leading to inequities in reimbursement and dissatisfaction among drivers (https://cardata.co/blog/the-employers-guide-to-favr-car-allowances/).

Pharma Sales Teams Are Embracing FAVR

In response, many pharmaceutical companies are turning to Fixed and Variable Rate (FAVR) reimbursement programs. These IRS-compliant programs calculate reimbursements based on real-world costs, including both fixed expenses (like insurance and depreciation) and variable ones (like gas and maintenance). Most importantly, FAVR programs are tax-free for both employer and employee when designed properly and managed, offering significant cost advantages over traditional, more outdated methods (https://cardata.co/blog/what-is-a-favr-car-allowance/).

The shift is paying off. Pharma companies have reported saving an average of $3,000 per driver annually by switching to FAVR, thanks to reductions in administrative burden, tax waste, and capital tied up in depreciating assets (https://cardata.co/blog/fixed-and-variable-rate-favr-reimbursement-programs/). The model is also scalable, allowing growing sales teams to add reps without incurring the logistical overhead of managing more fleet vehicles where unnecessary.

Comparing with Other Healthcare Segments

The home healthcare sector has also seen rising vehicle expenses, driven by increased demand for in-home visits. Unlike pharma reps, who often drive predictable routes to healthcare facilities and clinics, home healthcare workers have more variable mileage patterns. This makes flat allowances particularly inefficient and has led many firms in that space to also adopt FAVR or mixed reimbursement models for a range of mileage types (https://cardata.co/blog/taxation-vehicle-reimbursement-favr-cpm-allowance/).

Medical device companies face similar dynamics to pharma, with highly mobile field teams covering regional or national territories. However, the heavier equipment they transport often necessitates specialized vehicles or larger models, increasing maintenance and fuel costs. Here too, companies are moving away from fleet ownership in favor of employee-owned vehicle models paired with variable mileage-based reimbursements (https://cardata.co/blog/mileage-reimbursement-programs-employee-owned-fleets/).

In contrast, administrative healthcare roles typically involve much less driving and are often centralized in fixed locations. These segments have not experienced the same inflationary pressure in vehicle expenses, though some larger hospital networks have begun implementing centralized mileage tracking tools to ensure IRS compliance and equity across roles, such as accountable Cents per Mile (CPM) reimbursement (https://cardata.co/blog/mileage-rate/).

The Role of Technology in Cost Control

Automation has emerged as a critical factor in managing vehicle programs across all healthcare sectors. In pharma, companies are deploying mobile mileage tracking apps that eliminate manual logs and ensure accurate, IRS-compliant documentation. On average, each driver can recover 40 hours of work per year previously lost to paperwork, and HR teams overseeing 100 or more drivers can save up to 4,000 hours annually (https://cardata.co/blog/how-hr-managers-benefit-from-outsourced-mileage-reimbursement-programs/).

These tools also generate data that finance leaders can use to monitor program efficiency, compare costs across regions, and identify outliers. Mileage dashboards, for example, can reveal underused vehicles or inefficient routes, insights that can inform territory realignment or even reductions in program size (https://cardata.co/blog/tips-improve-fleet-management/).

Navigating Inflation, Compliance, and Complexity

Between 2021 and 2023, inflation drove up the cost of vehicle ownership across the board. New car prices rose over 20%, used car prices increased by nearly 25%, and insurance premiums climbed due to higher repair costs and labor shortages (https://cardata.co/blog/hybrid-tax-free-mileage-reimbursements-programs/). These macroeconomic forces have forced healthcare companies to reevaluate the true cost of mobility.

In pharma sales, where vehicle use is frequent and essential, a 4–6% increase in vehicle expenses may seem modest. When applied across hundreds or thousands of reps, it translates into millions of dollars annually. Although FAVR programs don’t directly control macroeconomic pressures, FAVR can minimize the impact of these cost shifts and shield organizations from IRS penalties and audit risks by ensuring tax-compliant reimbursements (https://cardata.co/blog/understanding-irs-tax-rules-for-car-allowance-favr-accountable-and-taxable-allowance/).

It’s also worth noting that states like California, Illinois, and Massachusetts mandate that employers fully reimburse work-related vehicle expenses. Companies operating nationally must navigate these regulations while maintaining a consistent and fair program across regions. FAVR programs, being IRS-aligned, help ensure compliance across these states (https://cardata.co/blog/cali-illinois-massachusetts-mileage-reimbursement-rules/).

Green Targets and EV Integration

Environmental goals are also shaping vehicle expense strategies. With transportation accounting for 28% of U.S. greenhouse gas emissions, companies are looking at electric vehicle (EV) adoption as part of their sustainability plans (https://cardata.co/blog/construction-vehicle-trends/). For pharma, where field reps typically drive sedans or compact SUVs, the transition to EVs is especially feasible.

EVs reduce fuel costs, with many drivers spending less than $400 annually on electricity compared to $1,600 or more on gasoline. Maintenance costs are also lower, and federal tax credits of up to $7,500 make EV ownership attractive to employees (https://cardata.co/blog/can-my-company-have-a-fleet-of-electric-vehicles/). FAVR programs are well-suited to support EVs, as reimbursement rates can be adjusted based on vehicle depreciation curves and remain a competitive incentive to drive EVs.

Some pharma firms are already piloting EV-focused FAVR programs, particularly in urban territories where charging infrastructure is more accessible. Others are incorporating emissions tracking and carbon reduction metrics into their fleet strategies to align with corporate ESG goals (https://cardata.co/blog/strategic-mobility-solutions-non-specialty-vehicles/).

The Path Forward: Precision Over Simplicity

If one lesson has emerged over the past five years, it’s that simplicity isn’t always cost-effective. Flat allowances may seem easy to administer, but they often lead to overspending, tax exposure, and overall dissatisfaction. Company cars offer brand control but come with hidden costs and long-term liabilities.

By contrast, precision-driven reimbursement programs like FAVR offer the best of both worlds: cost control for employers and fairness for employees. They flex with inflation, account for local fuel prices, and provide tax-free benefits when structured properly. Paired with automation, they enable scalable operations without adding administrative complexity (https://cardata.co/blog/why-mileage-reimbursements-need-mileage-tracking-apps/).

Conclusion: Rewriting the Mobility Playbook

Pharmaceutical sales organizations are not alone in their mobility challenges. Across the healthcare industry, companies are grappling with rising vehicle expenses, stricter compliance demands, and growing expectations around sustainability. But pharma’s unique field structure and predictable driving patterns give it an advantage: one that smart companies are using to build more efficient, compliant, and future-ready vehicle programs.

The next five years will likely bring even more change. As electric vehicles gain market share, reimbursement strategies will need to evolve. As territory coverage expands, automation will become indispensable. And as every dollar of spend is scrutinized, finance leaders will continue rewriting the mobility playbook, choosing data over guesswork and accountability over outdated norms.

Doing more with less is no longer just a goal. In the world of pharmaceutical sales mobility, it’s the new standard.

Disclaimer: Nothing in this blog post is legal, accounting, or insurance advice. Consult your lawyer, accountant, or insurance agent, and do not rely on the information contained herein for any business or personal financial or legal decision-making. While we strive to be as reliable as possible, we are neither lawyers nor accountants nor agents. For several citations of IRS publications on which we base our blog content ideas, please always consult this article: https://www.cardata.co/blog/irs-rules-for-mileage-reimbursements. For Cardata’s terms of service, go here: https://www.cardata.co/terms.