The annual report on how much the U.S. healthcare system pays for meds is out. And it’s confirming a lot of people’s fears about the pharmaceutical drug industry.

Namely that pharma is unreasonably hiking its prices. According to the figures released by the IMS Institute for Health, spending on prescription drugs in the U.S. rose 12 percent to the record high of $425 billion (before discounts) in 2015. The problem is, though there’s a fairly unanimous agreement that drug prices are booming, no one’s agreeing how much, why, or how to stop it.

In the past few months there’s been pushes for the pharmaceutical industry to be reigned in somehow; especially after Martin Shkreli, former-CEO of Turing Pharmaceuticals, raised the price of the AIDS drug Daraprim from about $13.50 per pill to about $750. But though seemingly seems to sense the growth in medicine costs as too much, there’s no one method of tackling it. As FiercePharma notes even the data isn’t as clear cut as it may initially seem:

But the figures do not paint a black and white picture and the report notes that in fact market forces have kept growth relatively low, as the average net price increase for branded drugs was just 2.8% in 2015, versus 12.4% using wholesale prices. And while growth for wholesale meds was 12% in 2015, this is down from the 14% registered in 2014.

Murray Aitken, executive director of IMS Institute for Healthcare Informatics, explained: “That reflects the new dynamics in the marketplace, where we have heightened competition in several major therapy areas, including diabetes, with manufacturers taking price concessions through rebates.”

Photo Credit: klynslis cc
Photo Credit: klynslis cc

He added that this was coupled with more “aggressive tactics” by pharmacy benefit managers and health insurers to restrict access to certain drugs unless manufacturers agree to big discounts.

The IMS report found that those concessions reached $115.3 billion in 2015–more than double the $52.4 billion offered in 2009.

But there were spikes. Cancer saw one of the biggest jumps, with U.S. oncology drug spend hitting $39.1 billion in 2015–an 18% jump. Spending on treatments for autoimmune diseases –such as rheumatoid arthritis– was even higher, rising a staggering 28% to $30.2 billion.

Even still, there’s plenty of gears in motion working to curb the rise of pharmaceuticals: Last month the Centers for Medicare and Medicaid Advancements and the Pharmaceutical Research and Manufacturers of America released proposals that seek to use value-based purchasing, presidential candidates jumped into the debate, and a handful of states made efforts to curb drug prices by introducing “drug pricing transparency bills.”

Among the number of factors people cite for rising drug prices are a ten percent jump in number of prescriptions filled last year, thanks to the 20 million people who are now covered by the ACA, and high-profile patent protections, which some argue results in fewer blockbuster drugs getting generic competition.

But according to Simon J. Elliott of PharmaPatents, recent developments in the pharmaceutical drug market illustrate what happens when the market functions without patents:

Pyrimethamine is extremely potent against toxoplasmosis, but the number of people with that disease are (fortunately) few. With such a small potential market and off-patent prices, there was little incentive for generic drug companies to invest the at least $400,000 it can take to obtain FDA approval of a generic drug. Thus, even though the relevant patents expired decades ago, there is only a single FDA-approved supplier of pyrimethamine. Once Turing Pharmaceuticals bought the rights to pyrimethamine and raised the prices to $750 per dose, the missing market incentive suddenly appeared. Express Scripts, the largest U.S. pharmaceutical benefit manager, quickly reached a deal with generic company Imprimis to provide pyrimethamine for $1 a pill.

Like pyrimethamine, benznidazole is an old drug used for a relatively rare infectious disease. Benznidazole treats Chagas disease, which is seen in the U.S. in fewer than 300,000 people. Prior to KalBios, the only way to obtain the drug was through the Centers for Disease Control, which provided it for free. As with pyrimethamine, the small potential market and lack of patent protection to limit market entry make it unsurprising that no generic drug company had sought FDA approval for benznidazole. KaloBios exploited that market vacuum by applying for  FDA approval, which would give it market exclusivity and the ability to raise prices, at least temporarily.

Therefore, in both cases, the spike in drug prices was not caused by monopoly power supported by patents, but by monopoly power stemming from the barrier to market entry associated with the requirement for FDA approval.

But the pharmaceutical industry is still struggling to shed its “bad boy” image that paints drug makers as driving up prices purely to maximize profits. And with a public face like that, consumers will likely be looking for legislative avenues to help them out. Whether it’s the 2016 election or just your friendly neighborhood state initiative, don’t be surprised if price regulations start hitting pharmaceutical companies. It probably won’t be the magic bullet, but it just might help the medicine go down.