To investigate the problem of pricing and reimbursement of pharmaceuticals in Iran. A large amount of country’s Health care expenditures, including insurance organizations’ expenses, are spent for pharmaceutical products. However, the high amount of capital spent by the users for purchasing pharmaceuticals indicates a serious flaw in the system. As will be shown, this flaw is due to the structures, policies, and regulations of Iranian medical insurance system. This is a descriptive study and, therefore, ethnographic site and fieldwork were used as the main source of information. Furthermore, information on the Internet and several Iranian online databases has been used for comparison purposes. Ministry of Health and Medical Education (MOHME) is the main responsible body for pharmaceuticals in Iran. However, different government organizations such as Ministry of Commerce, the Central Bank of Iran, and National Industries Organizations are involved in policy-making in this sector. MOHME decides how to allocate governmental supports and foreign currency quotas, to various related industries. This is done due to the fact that MOHME decides which pharmaceuticals should be covered and distributed in the country. However, prices are set by insurance organizations due to their bargaining power over MOHME. Insurance companies pay approximately 70-90% of the final price of a product. However, for purchasing expensive products, confirmation from insurance companies is needed. The reimbursed price is set at the level of the lowest priced equivalent on the market. These flaws and loopholes arise because of system’s negligence on research and development methods and, therefore, lack of standard regulations on reimbursement decisions and priority settings. Inflexible profit margins for different products with different unit costs, incomplete support for vulnerable groups and patients with chronic diseases, and absence of rational pharmaceutical usage campaigns can be named as other major problems.