People will pay what it takes for things they need or feel they absolutely need. No free-market laws apply here.
So, maybe you don't need that snazzy new pill with the happy TV commercials, because the staid old generic one will do just fine. But if the two cost the same from the perspective of the person who asks their doctor it, there's no reason for them to even know that one is costing their insurance company more than the other. And in most cases, neither will their doctor. That means more demand and higher price for the people actually paying for it, which ends up being everyone with insurance.
