Politics aside, this is such an interesting market dynamic from the economics point of view. In a competitive market, pharmaceutical manufacturers would all com

Politics aside, this is such an interesting market dynamic from the economics point of view. In a competitive market, pharmaceutical manufacturers would all compete on making the same drug at the cheapest price. But patents make this a Government-granted monopoly. On the demand side, patients would like to buy the same drug from the cheapest vendor but because of insurance agencies, do not even see the full cost of the drug individually. This lack of pricing information, combined with the demand for medicines being inelastic (and also not following the law of diminishing returns), makes the demand curve completely vertical. While the insurance agencies could negotiate with drug makers for competitive prices on similar drugs, they are also competing with the Government-backed insurance entities like Medicare which have vastly different incentives. Clearly lawmakers and budget-conscious bureaucrats would like to get the best price from the drug makers but given a near perfect inelastic demand curve and a monopolistic supplier, there is absolutely nothing they can do. Since Government granted this very monopoly for the sake of encouraging innovation, any attempt to revoke IP rights that threaten the monopolies' entire business, will be met with extreme resistance. Is it better for the consumers to be in a monopoly market where a necessary medicine costs twice the annual per capita income or risk being in a competitive market where no such medicine might exist if the IP right advocates are to be believed? Aligning the incentives for all entities properly in this market is not straightforward, especially if you consider US and the rest of the world as being indirectly linked. Gilead knows they can charge $84,000 in the US because of their monopoly. This makes it possible for the rest of the world to get the same medicine cheaper. What remains unknown is, without US being such a cash-cow for pharmaceuticals, how would the rate of innovation in drug formulation change? If Merck, BMS, Pzifer, and J&J can't charge what they want, will pharmaceuticals and India and China take over and create new drugs? Manufacturing drugs is a minor variable cost. Question is, will the fixed cost to create new drugs be made by others? If so, why isn't it being done already at the same scale?