High drug prices discourage research and dampen innovation – date.

These policy changes have resulted in many negative effects, starting with monopoly pricing. In the drug industry, as with any industry, consolidation facilitates collusion. When a few companies control a market, it becomes easier to maintain an effective cartel because no member can step out of the agreement without being quickly detected by the others. The market for insulin may be a case in point. Since 2010, the three American manufacturers of the drug have all raised their prices by 168 percent, 169 percent, and 325 percent, respectively.

Even without forming cartels, monopolistic companies have a greater ability to raise prices because they don’t face the full pressure of a competitive market. Mylan Pharmaceuticals could raise the price of its Epipen by 450 percent precisely because it held about 90 percent of the market. And this applies to all kinds of drugs, branded and generic alike. Between 2010 and 2015, for instance, nearly a quarter of all generic drugs saw at least one price increase of 100 percent or more, and some saw increases of 1,000 percent or more.

Monopolization also tends to discourage research spending and depress innovation. One reason: merging companies tend to cut research spending. Both Pfizer and Valeant Pharmaceuticals, for example, cut their R&D spending after acquisitions. Academic studies confirm that mergers tend to depress innovation among drug companies. Indeed, many drug companies have turned to mergers and acquisitions to make up for their lack of innovation—acquiring firms with promising or profitable drugs rather than developing such drugs in house.

These developments and tactics have created the current American pharmaceutical landscape. Drug companies grow larger, pursue more mergers and acquisitions, and raise prices. Nearly all Americans have felt the effects of this skewed and unequal market.