Alright folks. Take a deep breath, and consider: when a good or service is sold in a "natural monopoly" due to the absurdity of introducing redundant infrastructure to produce competition, we call the provision of the good or service a utility and regulate prices in the public interest, at least when demand for the good or service is inelastic because it's a necessity (e.g. clean drinking water provided to the tap, which we have usually socialized at the local level, or electricity or piped-in natural gas which we haven't).
You are pointing to products/services that are mature -- where the infrastructure is already present, and all that is required are relatively predictable/stable operating and maintenance costs. So, a fixed rate of return -- even one paired to the cost of raw materials -- can work decently. Also, the products you are talking about are fungible -- a KwH is a KwH, a gallon of water is a gallon of water, and an MCF is an MCF, regardless of how or by whom it is provided. So, you have a clear, objective, stable measurement of the product being produced/delivered so pricing is predictable and quantifiable in advance. You also are talking about products/services that are inherently monopolistic such as water, and local
distributors (thought not
suppliers) of gas/electricity. That latter point is important -- why do you think
suppliers of gas or electricity are free to charge what they wish, but the local distributors who actually deliver it to homes via pipes/conduits are not?
Explain, then, why so many on this board regard the regulation of price of goods with inelastic demand because they are necessities (e.g. the only effective drug for a potentially fatal illness) which are sold under an artificial monopoly called a "patent" created only by government intervention in the market is obnoxious to free market economics. Development costs? Nope, utilities also have sunk costs in infrastructure, but they are regulated in the public interest.
1) They're not monopoly providers. There are multiple drug companies who compete against each other for the development of new drugs.
2) They are not providing necessities in the normal sense of the word. Necessities are things that a particular society cannot survive without. But by definition, newly developed drugs are things society has survived without even
last week. Even if a company decided it was no longer going to sell
new drugs - a withholding of a good/service equivalent to turning off your water -- the tens of thousands of drugs already developed and outside patent, as well as all the drugs developed overseas, would still be available for purchase. We'd be chugging along just as well as we were a week ago. The developers of new drugs don't have the power to bring a society to its knees in a matter of day by withholding their product. The utilities you mentioned do.
3) Drugs are not fungible like KwH of electricity, or gallons of water, so the predictability of pricing is impossible. That problem is magnified by the reality that most drugs that begin development never make it to market, so you don't know if the thing you're developing for sale can even be sold at all. So how to you account for the cost of that?
4) Most importantly, if you treat drug companies like a utility -- with guaranteed rates of return, build-in profit margins, etc., that's exactly how they're going to act. You will significantly reduce their incentive to take the financial risks inherent in developing new drugs, because the chance to make a big profit for the limited period under the drug is no longer under patent won't exist.