Illustration: Sarah Grillo/Axios

The system for setting drug prices in the U.S. is a labyrinth. It can be enormously frustrating for patients — and enormously rewarding for the drug companies, pharmacies, doctors, hospitals and assorted middlemen that profit along the way.

The big picture: The cost of a drug depends on many factors: whether it’s a brand-name product or a generic; secretive industry negotiations; even the way the drug is administered. Each patient's price may be different.

  • “There’s so much variability, and that’s where all the money is being made,” said Eric Pachman, a former pharmacy manager who co-founded the drug data firm 46brooklyn Research.

How it works: Using publicly available data and common industry assumptions, Pachman built out a rough, simplified sketch of how money changes hands for a “typical” generic drug.

  • This drug would cost about $3 to make and would sell for about $15.
  • So what happens to the other $12? It’s split among the manufacturer (about $3), the pharmacy ($1.50), a wholesaler ($2) and, finally, the largest share goes to the company that manages your insurance plan’s drug benefits ($5.50).

The numbers would look a lot different for the more expensive brand-name products that drive most of America’s drug spending. Those are the ones you’ve probably heard of, like the EpiPen or Humira, the world’s top-selling drug.

  • They often start with high sticker prices. Humira’s is more than $58,000 per year, according to Elsevier's Gold Standard Drug Database.
  • Different insurance plans negotiate different discounts off that list price. All of them are kept secret. The negotiators also keep some of the savings for themselves. That number, too, is a secret.
  • There’s a whole different pricing system for drugs administered by a doctor and yet another system for certain hospitals.

The bottom line: It’s a free-for-all behind the scenes.

  • “The system is vulnerable, and you can abuse it,” said Mick Kolassa, a retired consultant who helped drug companies with pricing practices for almost 40 years.

Go deeper with the other pieces in our drug prices Deep Dive:

Go deeper

Biden: The next president should decide on Ginsburg’s replacement

Joe Biden. Photo: Drew Angerer / Getty Images

Joe Biden is calling for the winner of November's presidential election to select Ruth Bader Ginsburg's replacement on the Supreme Court.

What he's saying: "[L]et me be clear: The voters should pick the president and the president should pick the justice for the Senate to consider," Biden said. "This was the position the Republican Senate took in 2016 when there were almost 10 months to go before the election. That's the position the United States Senate must take today, and the election's only 46 days off.

Trump, McConnell to move fast to replace Ginsburg

Photo: Alex Wong/Getty Images

President Trump will move within days to nominate his third Supreme Court justice in just three-plus short years — and shape the court for literally decades to come, top Republican sources tell Axios.

Driving the news: Senate Majority Leader Mitch McConnell and Senate Republicans are ready to move to confirm Trump's nominee before Election Day, just 46 days away, setting up one of the most consequential periods of our lifetimes, the sources say.

Updated 5 hours ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 10 p.m. ET: 30,393,591 — Total deaths: 950,344— Total recoveries: 20,679,272Map.
  2. U.S.: Total confirmed cases as of 10 p.m. ET: 6,722,699 — Total deaths: 198,484 — Total recoveries: 2,556,465 — Total tests: 92,163,649Map.
  3. Politics: In reversal, CDC again recommends coronavirus testing for asymptomatic people.
  4. Health: Massive USPS face mask operation called off The risks of moving too fast on a vaccine.
  5. Business: Unemployment drop-off reverses course 1 million mortgage-holders fall through safety netHow the pandemic has deepened Boeing's 737 MAX crunch.
  6. Education: At least 42% of school employees are vulnerable.