Truth or tale: can pharma companies set prices for new drugs as high as they want?

Added: 2026-05-21

[00:00:00]A reader asked us, is it true that pharma companies can set prices for new drugs as high as they want?

[00:00:08]It's true that companies first come up with a price for a new medicine using different methodologies, but this price isn't the final price. [music] In many European countries, the government regulates drug prices. In Switzerland, the authorities compare the drugs proposed price and efficacy with that of existing treatments for the same condition and to the prices in a group of reference countries. They then negotiate with the pharmaceutical company to agree on a maximum price.

[00:00:32]Sometimes the two parties fail to agree on a price and the drug isn't reimbursed through basic insurance. Some countries like the UK and Sweden also consider the value a drug brings to patients and [music] the economy such as in fewer hospital stays to determine if the drugs benefits justify the [music] price.

[00:00:49]Government involvement in price setting is also common in many other places in the world [music] such as Brazil, Canada, and China. The US is an outlier.

[00:00:57]It has traditionally left drug pricing to insurers, middlemen, and pharmaceutical companies, though the government now plays a bigger role in pricing for state-run schemes like Medicare. [music] So, in short, even if a company developed a miracle drug, they can't charge whatever they want for it.

[00:01:13]Companies propose a price, but government, other payers like insurers, or market forces will ultimately decide the final price.