Employers don't understand the 'black box' behind rising drug prices, and are fed up

Key Points
  • I spent the week at the National Business of Health conference with representatives from some of the largest employers.
  • They seemed fed up with the drug supply chain, in particular.
  • What will they do to fix it?
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Employers are fed up with the U.S. health care system.

That was my major takeaway from the National Business Group on Health's conference, which I attended this week alongside the benefits leads from some of the largest U.S. companies, including Amazon, Honeywell and IBM.

As you might expect, representatives from these companies talked about the innovative technology on the market and they talked up their new benefits and perks, like genetic tests and fertility treatments.

But the most of the conversations were focused on a more pressing issue: The rising cost of drugs.

Numerous studies have found that working Americans are paying more each year for health care services, which is putting pressure on household budgets. And many are complaining about it to the benefits departments.

Individuals and families don't have much power to change that, given the powerful, well-funded lobbies that are are fighting to preserve the status quo. And these lobbying budgets are increasing, with more policymakers turning their attention to the issue of drug pricing.

But large employers do have a lot of clout. And they seem ready for change.

On Friday, the National Business Group on Health's president and CEO Brian Marcotte put up a slide showing a word cloud, representing how employers felt about supply chain, which includes pharma companies, and the middlemen that take a chunk of the drug's list price.

Notice the most prominent terms: "Convoluted," "a mess," "black hole."

In this current environment, some big companies are fighting back by teaming up to tackle one or more of the problems underlying rising costs. There have been many such coalitions over the years: the joint venture between Amazon, Berkshire and J.P. Morgan that was announced earlier this year; the Health Transformation Alliance, which includes IBM, Macy's and American Express; and Dossia, a group that once included Walmart and AT&T before it shut down in 2016.

These groups have struggled, in part because employers have very different goals. Some have workforces distributed around the world, while others are focused on a single region. That makes it difficult to prioritize projects and negotiate regional contracts.

Another issue is that employees haven't always welcomed the changes. As Dossia's former executive director pointed out in an interview, privacy is still a real issue.

That said, it's possible that the Amazon consortium will have a better shot. If the tech giant steps up to the plate to become a distributor of complex health care products, including prescription medicines, that could provide a real alternative to the current system.

Either way, I got a general sense at the conference that employers were unsatisfied. They asked tough questions, held companies in the drug supply chain to task, and seemed eager to learn about its complexities.

Let's hope they use their collective power for good.