They can be reformed, and then we'd see many suppliers cranking out cheap plentiful insulin.
That's just nonsense. The other highly inelastic market is oil, there are massive price excursions when supply and demand are not matched. Have you seen what happened when oil demand dropped this spring? Prices completely fell off a cliff! Demand will not increase just because new capacity enters the market, instead prices will drop to make everyone unprofitable, including the new entrant, who will never be able to recover the initial investment.
Since the problem we're talking about is the very high prizes for insulin etc in the US, does that mean we agree this would be a solution for that problem?
No. You'd see volatility and a price drop until someone goes bankrupt, and then the system is back where it was before. Good luck finding an investor for that.
Why the market fetishism? The state of affairs needs price controls.
Prices do drop with innovation. Consider the praziquantel story. The compound was discovered in the early 1970s by a Bayer-Merck joint venture as part of a discovery effort for tranquilizers. It wasn't psychoactive but very efficaceous against flatworms (schistosoma and tapeworm) and then promptly shelved because of its high price, the synthetic route was complicated.
South Korea had a schistosoma problem at that time and couldn't pay Bayer for the compound or patent license, in the early 1970s Korea was still a threshold country, so at first they pirated it and then, because the original isoquinoline route required expensive starting materials the Koreans developed their own route. The glycine route made it possible to produce it cheaply for their own people and also opened up the worldwide veterinary market. This was actually the foundation for the Korean chemical industry.
The market works. It's well understood, just it works not in the way you think.
That's just nonsense. The other highly inelastic market is oil, there are massive price excursions when supply and demand are not matched. Have you seen what happened when oil demand dropped this spring? Prices completely fell off a cliff! Demand will not increase just because new capacity enters the market, instead prices will drop to make everyone unprofitable, including the new entrant, who will never be able to recover the initial investment.