The complicated web of American drug pricing
Americans spend hundreds of billions on prescription drugs each year. In fact, about $370 billion as of 2019. And employers in charge of healthcare plans paid for about $166 billion of that.
It's middleman firms that actually negotiate these drug prices on behalf of employers. But because they keep their data secret, companies have no idea whether they're getting a fair deal on drug prices or not. And an Axios investigation shows these intermediaries are working hard to keep it that way.
- Plus, the Department of Justice sues Texas over voting rights
- And, eating out could soon mean more encounters with robots
Guests: Axios' Ben Herman and Russell Contreras.
Credits: Axios Today is produced in partnership with Pushkin Industries. The team includes Niala Boodhoo, Sara Kehaulani Goo, Julia Redpath, Alexandra Botti, Nuria Marquez Martinez, Alex Sugiura, Sabeena Singhani, Lydia McMullen-Laird, Michael Hanf, and David Toledo. Music is composed by Evan Viola. You can reach us at [email protected] You can text questions, comments and story ideas to Niala as a text or voice memo to 202-918-4893.
Editor's note: This conversation was updated to correct an error. The Supreme Court conservative majority is 6-3 (not 6-4).
- Documents reveal the secrecy of America's drug pricing matrix
- DOJ cites discrimination in lawsuit against Texas over voting districts
- Eating out will mean robot encounters
NIALA BOODHOO: Good morning! Welcome to Axios Today! It’s Tuesday, December 7th. I’m Niala Boodhoo. Here’s what we’re watching today: the Department of Justice sues Texas over voting rights. Plus, eating out could soon mean more encounters...with robots.But first, the complicated web of employer drug pricing... is today’s One Big Thing.
Americans spend hundreds of billions on prescription drugs each year. In fact, about $370 billion as of 2019. And employers in charge of healthcare plans paid for about $166 billion of that. It's middleman firms, which actually negotiate these drug prices on behalf of employers. But because they keep their data secret, companies have no idea whether they're getting a fair deal on drug prices or not. And an Axios investigation shows these intermediaries are working hard to keep it that way. Bob Herman is Axios’ healthcare business reporter.
BOB HERMAN: Hey, Niala
NIALA: So this is kind of complex. If I go to a pharmacy and I pick up a prescription that's covered by my employer, who's negotiated that price?
BOB: Yeah, there's a lot of action that occurs behind the pharmacy counter, companies that most Americans have never heard of. Specifically in our investigation, we're referencing what's called a drug pricing coalition. So imagine your employer goes to a consulting firm. This consulting firm helps with benefits and you know, what kind of plans they should offer to their employees. And then they go to what's called pharmacy benefit managers. And these PBMs essentially are the companies that negotiate drug prices with drug manufacturers. They decide which drugs get preferential treatment. We focused specifically on a drug pricing coalition that is started by Aon. Aon is this big global benefits firm. They charge employers anywhere from $20,000 a year up to $300,000 a year, just to be part of the coalition. And you get to supposedly benefit from the prices that are negotiated as being part of it. But there's so much money that's paid on the backend that, you know, is at the root of America's drug pricing crisis. What our investigation found even beyond that was if you're an employer and you want to kind of figure out a little bit further about what are the prices that I'm paying, it's not so easy. If you try to request your drug pricing data, you may or may not get it. Kind of just sign on the dotted line and say, give me good drug pricing deals. And then you don't really know what happens after that.
NIALA: What did Aon say in response to your reporting?
BOB: They sent a statement saying that members of his coalition saved on average 18% of their drug costs, but they didn't answer any follow-up questions. And, um, we had many.
NIALA: And does is this ultimately end up affecting us, the workers, the employees?
BOB: It does. Uh, everything ultimately flows back to workers. Um, you either pay it in lost wages. You know, an employer has to pay more towards drug benefits, that means less money that they can give to you in your salary or your hourly wage. So ultimately workers are bearing the cost of this. And for employers, if you're having to spend more money on drugs that makes it harder to do what you normally do, which is the core of any business, whether you're making planes or cars or, you know, whatever function it is that you do. So this, this ultimately strains, both the workers and the companies themselves.
NIALA: Bob Herman is Axios’ healthcare business reporter. You can read all of Bob's reporting on this at axios.com. Thanks, Bob.
BOB: Thanks, Niala.
NIALA: In 15 seconds, we’ll be back with the Justice Department’s move against new redistricting maps in Texas.
NIALA: Welcome back to Axios Today. I’m Niala Boodhoo.
The Department of Justice yesterday filed a lawsuit against Texas, saying that the state’s Republican lawmakers discriminated against Black and Latino voters with their new redistricting maps. It’s the first time in almost half a century that Texas lawmakers didn’t have to consult the federal government before making changes to their maps, because of the supreme court’s stripping of the voting rights act in 2013. Here’s Attorney General Merrick Garland on Monday:
MERRICK GARLAND: As the Supreme Court has observed, a core principle of our democracy is that quote voters should choose their representatives, not the other way around.
NIALA: Axios’ Race and Justice reporter Russell Contreras is here with me in studio in D.C. to explain what’s happening here -- Hello, Russ.
RUSS CONTRERAS: Amazing to be with you.
NIALA: Russ, Merrick Garland said the redistricting plan drawn by Texas lawmakers violates section two of the Voting Rights Act. What’s in that?
RUSS: Well, section two of the Voting Rights Act allows districts to form based on racial or linguistic interests. That means districts can form to help include the representation of African-Americans and Latinos. So what the attorney general is alleging is that the Republicans in Texas have conspired to dilute those districts, especially in urban areas like Houston, Dallas, and San Antonio.
NIALA: The Supreme Court, of course, gutted the Voting Rights Act in 2013. How is that playing out in this case?
RUSS: Well, that's the big question. I mean, when they gutted the Voting Rights Act, what they did was get rid of the protections, especially in the old South, that they all had to follow. This particular case looks at redistricting and how we organize these districts, especially where they represent Latino and African-American neighborhoods. So you could have a scenario where you have a growing population of people of color in Texas, but yet a reduced number of people who are people of color from Texas. So it's the battle that's going to go on across the country. This is a test ground and Texas represents the first step in it.
NIALA: What are Republican lawmakers saying about why they have done this?
RUSS: Well, they give a number of reasons. They say they're doing this to, basically, level the playing field, give rural voters more power. But in attempt what this does, is most of the population in Texas is located in urban areas, the urban areas are more democratic. There are more people of color. They are more diverse. And what the lawmakers are doing in this case, is saying, we need more rural representation. What that means is rural and White, so this is a cultural battle on steroids.
NIALA: Are they saying then that making it more equitable for rural voters is actually fulfilling part of section two of the Voting Rights Act?
RUSS: No, in many cases they're ignoring this and saying that we no longer have to abide by this. And this is a test case. Do we still need to organize based on racial or linguistic interests? And they adopt the well we're a color blind society now. And of course, when you're color blind, you're ignoring the systemic racism that comes with race. So, this is, this is battleground 101, where we're looking at race as a way to address past discrimination.
NIALA: What happens next with this case then?
RUSS: Well, it’s going to go all the way through federal court, probably end up in the Supreme Court. And right now with a 6-4 conservative majority, it's unclear if they will support the United States position or will they endorse Texas’s.
NIALA: Axios’ Race and Justice reporter Russell Contreras. Thanks, Russ.
RUSS: Great to be with you.
NIALA: OK before we let you go today:
Automation is making its way into the food industry…meaning it’s more likely than ever that you’ll come across a robot next time you go out to eat, or head to the supermarket. The Axios visuals team did a deep dive into how the pandemic has transformed the food industry… And here’s some of what they found: robots are flipping burgers in California...and waiting tables in Minnesota. A robot named Marty is reporting spills in the aisles of Giant Company supermarkets… And some robots are even learning to till fields and pick fruit. You could soon even come across a delivery robot on the sidewalk of your town or city, bringing food straight to your door. And of course as worker shortages across the country continue, we could see robots fill other roles in the industry, too...like manual labor at wineries - like on Star Trek’s Picard!
You can see lots of cool graphics about how covid has affected the food industry -- we’ll have the link to the deep dive in our show notes. And thanks to our visuals team for this, especially Allie Carl and Brendan Lynch.
That’s all we’ve got for you today! You can reach our team at [email protected] or reach out to me on Twitter. You can also text me at (202) 918-4893. I’m Niala Boodhoo - thanks for listening - stay safe and we’ll see you back here tomorrow morning.