Could drugmakers have charged a billion dollars a pill before?
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The pharmaceutical companies can charge whatever they want for the drugs, a billion dollar a pill or more if they want. However at that price nobody is going to buy their pills. So they charge as much as they think people are willing to pay for the medicine.
The insurance companies have been in some better position to negotiate with them then patients. They can threaten to not cover a drug, recommend patients use other drugs or therapies which are covered, not to get any treatment at all, or if they do take the drug then they are in no position to pay for it. The pharmaceutical companies have therefore been forced to lower the drug prices to somewhat reasonable prices, for patients with full medical insurance coverage with the insurance companies that have reach a deal. But not for the rest, and the prices are not as low as they can be since insurance companies need some treatments to be covered.
Medicare do act like a medical insurance company in many ways but cover a lot more people then other insurance companies. So this is the largest group of people that the pharmaceutical companies sell drugs to. Medicare will negotiate drug prices just like private insurance companies but have a lot more weight behind their threats. In addition to this while insurance companies can negotiate a discount on drugs the federal government is not allowed to buy drugs on discount. So whatever price medicare is able to negotiate is the list price for that drug both for people with medicare, without insurance and with any other insurance company.
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