The root problem in our drug pricing system isn’t just high prices—it’s how those prices are set. In a normal market, buyers and sellers see the price and make decisions accordingly. But in pharmaceuticals, the system is built on information hiding and artificial scarcity.

LIST PRICES AREN’T REAL

Manufacturers set list prices arbitrarily high, but almost no one pays that price. Discounts, rebates, and confidential deals create a shadow market where the real cost is hidden from patients, doctors, and even insurers. That destroys any meaningful price competition.

ARTIFICIAL SCARCITY FUELS COST SHIFTING

Because competition is so limited—often by design—drugmakers segment the market. Veterans Affairs gets steep discounts. So do 340B hospitals. Who makes up the difference? Medicare, private insurers, and patients without leverage. This cost shifting masks the real inefficiency of the system.

THE MARKET SIGNALS ARE BROKEN

In theory, high prices should invite competition. But in practice, manufacturers deter entry with a powerful threat: “If you launch a competing drug, we’ll slash our price to the floor—and you’ll lose money.” That threat is credible because the original price was inflated to begin with. It’s not supply and demand; it’s strategic intimidation.

ANTITRUST ISN’T DOING ITS JOB

Antitrust law focuses on conduct—on what companies actually do. But when the threat of retaliation is enough to scare off competition, nothing illegal has to happen. The law wasn’t built for a world where price threats, patent thickets, and rebate traps do more damage than a monopoly ever could.

COMPETITION IS BLOCKED BEFORE IT STARTS

We’ve allowed a system where innovation doesn’t just win—it locks others out. Reformulations, exclusivity deals, and market fragmentation make it almost impossible for generic or biosimilar competitors to break in. And once competition is gone, prices stay high by default.

FIXING THE COMPETITIVE ENVIRONMENT

We don’t need to destroy profit incentives. But we do need to:

– Restore transparent pricing across all buyers

– Prevent anti-competitive threats tied to unjustified high launch prices

– Reform patent law to prevent strategic abuse

– Give antitrust teeth where deterrence, not conduct, does the damage

We can’t keep pretending the pharmaceutical market works like other markets. It doesn’t. And until we address that, we’ll keep paying more—not because we must, but because we’re allowed to be manipulated. We are the key stakeholder as the consumer and tax payer footing the bill.

A reform like this could save all payers—including Medicare, Medicaid, private insurance, patients, and employers/state governments—between $150 billion and $300 billion annually.