Why the Drug Pricing System Is Broken

I almost got fired in 1995 for bypassing a pharmaceutical approval process that took three months to answer patient questions. My crime? Putting patients before bureaucracy. I don’t recommend any employee bypass the process; I recommend working to improve it.

Thirty years later, after building a billion-dollar healthcare company, I’m still fighting the same battle – except now the challenge isn’t just red tape. It’s a pricing system so fundamentally broken that everyone benefits except for those it’s supposed to serve.

Let me be direct: I’ve had success in pharma. I know this industry inside and out. And I know the drug-pricing model in America needs to be completely reimagined. We all share responsibility for fixing it.

Here’s how the system works today: Pharmacy Benefit Managers (PBMs) negotiate “rebates” from pharmaceutical companies in exchange for putting drugs on insurance formularies. The higher the list price, the bigger the rebate. So PBMs benefit from higher prices. Pharma plays along because they maintain revenue. Insurance companies benefit from the spread. Middlemen take their cut at every level.

Everyone does well – everyone except patients who face deductibles based on inflated list prices and copays that bear no relationship to what drugs actually cost.

When I explain this system to people outside the industry, they struggle to believe it. “That can't be right,” they say. But it is.

We’ve built a healthcare economy where higher drug prices benefit literally everyone in the supply chain except the human beings taking the medicine.

And here’s the hardest truth: nobody really wants to tackle this comprehensively. We all talk about reform. We hold congressional hearings. We acknowledge the problem. But then everyone returns to business as usual, hoping this pressure subsides in three or four years so the current system can continue.

I’ve sat in enough boardrooms to know what people say privately. Pharma executives admit the pricing model is backwards. PBM leaders understand they’re adding cost without proportional value. Even government officials recognize the system isn’t working, but changing it would require everyone to give up something – revenue, rebates, political cover. So, we maintain a status quo that doesn't serve patients well.

This isn’t sustainable. And it’s not acceptable.

The Trump administration, whatever else you think of it, is willing to address this directly. They’re willing to negotiate with pharma companies. They’re willing to challenge a PBM system that previous administrations treated as untouchable. That takes political will, even if the approach isn’t perfect.

But here’s what won't work: negotiating prices on three or four drugs while leaving the underlying system intact. That’s not comprehensive reform. You’ve got to change the whole thing – the rebate structures, the vertical integration between PBMs and insurers, the opacity that makes it impossible for patients to know what anything actually costs.

So, what would real reform look like?

First, eliminate rebate structures that incentivize higher list prices. If PBMs want to negotiate, let them negotiate for lower costs, not bigger kickbacks.

Second, mandate direct price transparency from pharma to patients. No more confusion where the “list price” is one number and the “net price” is a secret.

Third, address the vertical integration that lets the same company own the PBM, the insurer, and the pharmacy – controlling every point in the supply chain.

Will pharma executives embrace this easily? Probably not. Will PBMs resist? Most likely. Will it be complicated? Of course. But what’s harder than all of that is explaining to patients why they’re struggling to afford medications in the wealthiest country on earth while everyone else in the system does fine.

I have zero business needs from the government. I’m not seeking contracts or approvals. I’ve already built my company. That gives me the freedom to say what industry insiders know but rarely state publicly: we’re all responsible – pharma, PBMs, government, Congress – for allowing this system to persist.

So, here’s my message to pharma executives sitting on the sidelines: Engage with this moment.

This administration is willing to address issues nobody touched for 40 years. You can help shape what comes next, or you can resist and likely face more dramatic changes anyway. But let’s be honest about what we’re defending – or not defending.

The status quo isn’t working for patients. We all know it. The question is whether we’re willing to work together to build something better.

Change is coming. Let’s all be part of the solution.

Faruk Capan is Chief Innovation Officer at EVERSANA and founder of Regentra. He built the first pharmaceutical patient portal in 1994 and has spent three decades advocating for patient-first healthcare innovation.