You draw the line when the basic requirements for a free market aren’t available: transparent pricing, customers that have a choice between different providers, customer that actually have the time to shop around.
That’s all fine, except those are all issues with our insurance model as opposed to the pharmaceutical industry. Why not fix the actual problem by addressing the labyrinth of middlemen in between the person consuming the medication, the doctor prescribing it, and the company producing it? That seems like a far better idea than making drug development non-profit, reducing the incentives for innovation and new discovery.
The vast majority of prescriptions are for treating chronic conditions. Those patients have time to shop around and consult with their physicians to decide on a course of treatment. There are multiple drugs available for most conditions, often including generics. Statins are some of the most heavily prescribed drugs and there are at least seven on the market now.
Hardly, often drugs treating same condition have different side effects, or different effect on patients. Physicians usually search for the drug that works best on a specific patient. Once you find a drug with the desired effect, it’s usually not a good idea to switch to another with different side effects.