How a slate of PBM reforms could impact the pharmacy business

Expect some small changes in how pharmacy benefits managers (PBMs) do business if and when any of the dozens of PBM-related bills moving through Congress passes.

Why it matters: PBMs have become something of a four-letter word in health care — just three companies command 80% of the drug market and control drug prices while acting as brokers between insurers and consumers. That's led startups and lawmakers alike to attempt to change things.

Between the lines: Backers of the bills say the reforms could remedy some misaligned incentives and make modest improvements.

• Sarah Kaminer Bourland, legislative director of Patients for Affordable Drugs Now, says the reforms "are in many cases tinkering around the margins, but a really important place to start."

Be smart: The Big Three dominant PBMs are CVS Health (Caremark), Cigna (Express Scripts) and UnitedHealth (OptumRx).

Zoom in: A "delinking" provision in the Senate Finance bill would shift PBM pay away from being based on the price of a drug to a flat service fee, removing an incentive for PBMs to prefer higher-priced drugs and lowering costs for patients whose coinsurance is based on the list price.

• While the Finance bill would restrict the circumstances in which this practice can occur, the House bills would impose transparency requirements on it.
• In addition, the Senate HELP bill would ban "spread pricing," in which a PBM charges a health plan more than it pays a pharmacy for a drug, and the House E&C bill would ban the practice in Medicaid.
• It would also require PBMs to pass 100% of rebates to health plans (currently, they keep a portion, and those figures are generally not publicly disclosed).

State of play: Startups are coming out of the woodwork in recent months to compete with PBMs.

• PBM startup SmithRx, which runs claims through algorithms that look for lower-priced medications, last March filled a $20 million Series B round.
• Former OptumRx CEO Mark Thierer last April reentered the drug pricing fray with a $35.4 million Series A raise for Waltz Health, a startup that lets users search for the lowest-cost medications.
• And of course, there's Mark Cuban Cost Plus Drug Company (MCCPDC), which launched in January promising steep discounts on 100 generic medications with prices that include a flat 15% fee and a $3 charge for pharmacists' labor.

What to watch: If the bills fail, keep your eye on transparency measures — a lowest-common-denominator way of taking on health costs — to end up in a possible year-end package.