Monopsony theory of Single Payer
If a firm cannot cover costs and make profit then it has no profit motive to develop and sell drug XYZ. So the profit motive is a &quot;cost plus&quot; model. The price must cover costs plus profit whether there is a single buyer or multiple buyers of the output goods.
If drug XYZ makes a net profit in a domestic market, and if there is a marginal profit in other global markets, then prices can be set lower in some parts of the global market and there is still an incentive to provide drug XYZ for marginal profits there.
Bottom line is price floors must be set by the market and/or government purchases if long term investments are to be recovered from future cash flows. This looks like cost plus pricing of output goods. Otherwise a firm that cannot recover costs from cash flows goes bankrupt and the assets transfer to another firm with less long term debt and then the cost can come down.