As far as I can tell, the game divvies up drops by their individual Star values, since everyone gets more or less the same number of shards, 2* loot and 3* loot at the end of every run. The problem is not all loot that's 2* have the same worth. You're probably familiar with that feeling of rage when you see someone get all the Iron Gears, Bushy Tails while you get stuff like Gel Cores. Statistically speaking, it happens to everyone, so it all balances out in the end. But that doesn't stop me from wanting to stab them for taking my Bushy tails, especially when I'm working on Wolver path and they're doing Cobalt path.
So a suggestion. When handing out loot, keep track of both stars and item types. So if six monster bones drop throughout the course of a full party run, every player can expect to get at least one, and two people will get an extra one.
If I remember right, it goes by a Round Robin form of distribution, meaning every player gets one drop at a time.
First player to pick up an item, will not receive another loot drop until the last person to receive an item, gets it.
This means it is quite easy to break the system, by picking up terrible items that will go to other players and saving the good stuff for your turn.
I'd much prefer it if item drops were instanced, so that everybody has their own chance of acquiring nice items.
This also stops the chat from filling up 4x as fast when in a group, because only your own item drops will appear.