Why drugs cost so much — and can be hard to even find

Hey there —

We spent all of June running through our — and your — Prescription Drug Playbook:

Four newsletter installments and two podcast episodes bringing together everything we knew — and everything we learned by asking you — about how to get the meds you need for prices you can (hopefully) afford.

As we kept noting, these are all workarounds, unreliable patches for a broken system.

But that system, in its way, works… for giant companies that profit from it.

Which makes this a great time to zoom out and take a look at that side of the system: The games those companies play.

In today’s podcast episode, we get introduced to a new player: Drug distribution companies.

It turns out, just three distribution companies control more than 90 percent of the U.S. pharma supply chain.

And their playbook doesn’t just affect the price we pay for drugs.

It contributes to shortages.

At any given time, the FDA reports shortages of hundreds of drugs — including major shortages in antibiotics and cancer drugs in recent years.

I learned about the Big Three distributors and their role in shortages from our friends at a podcast called Organized Money — a show all about monopolies.

So today on An Arm and a Leg, we’re bringing you their episode on drug distributors: “The great American drug shortage isn’t an accident, it’s artificial.”

The giants in our messed-up system

I’ve got a Spotify playlist for you — road trip, anyone? — and here’s a quick guide.

Let’s start with PBMs.

In the simplest sense, they basically sub-contract to insurance companies to administer the pharma side of health insurance: Deciding which drugs get covered, and negotiating who pays how much.

PBMs have grown huge — just three of them control the bulk of the drug market. You might think that would make them a match for fighting pharmaceutical companies, leading to lower prices — but the incentives they’ve created have led to… well, the opposite thing happening.

We broke it down in Wait, what’s a PBM (and how do they work)?

Sometimes when PBMs gain, pharma companies do lose. And vice versa. So they fight. But guess who gets hurt the most in the tussle? Us.

That’s the gist of Swimming with sharks, from 2022.

By the way, the Organized Money folks are super interested in tackling PBMs, and their latest episode looks at how the state of Ohio saved $140 million by kicking PBMs out of its Medicaid program.

OK, Pharma companies next: It’s all about the patents.

Insulin has long been a poster child for wild drug prices — prices that climbed and climbed for decades. And even though reforms in the last few years have brought out-of-pocket prices down in some cases, it’s still an unfinished story.1 And an amazing example.

Because it was discovered more than 100 years ago, and the researchers behind that discovery didn’t even want to patent it. They didn’t want anybody to profit from it. They just wanted people to have it.

We dove into that story in 2019, and expanded it in 2021: Revisiting insulin, as relevant (and expensive) as ever.

For a deeper dive on patents — and an honest-to-gosh fun, even uplifting story — check out our two-parter from 2023: The Fault In Our Patents: John Green vs. Johnson and Johnson. (Part 1, Part 2)

And: One of our very first episodes looked at How one drug got its $500,000 price tag, a collaboration with 99 Percent Invisible.

Finally: You’re out there, helping each other

We heard from Rose again this week: She and her fellow volunteers are running another clinic on July 31, at the Jamaica Bay branch.

“I think after these two, we will have to figure out next steps,” she writes. “We’re full of ideas.”

We’ve heard from more of you — just this week — offering to help Rose with future events, and offering to help us with projects. I couldn’t be more thankful.

Meanwhile, we’re spending a lot of time this week polishing up the new Arm and a Leg website, coming soon.

Catch you next week,

— Dan

1. The latest survey from the advocacy group T1International is very sobering. There has been some decrease in out-of-pocket costs since 2022, but more people report rationing — up from 1 in 4 to 1 in 3.