It's kind of like the university system. It's a (mostly) privately run industry that gets massive injections of cash from the government because of both campaign promises (everyone needs healthcare, everyone goes to college and, bonus, everyone gets a house) and it being an incredibly unpopular position to either remove that funding or make the program entirely public which would, imo, alleviate both problems (but have their own unique drawbacks). The hybrid model we have is the worst of both worlds.
The hybrid system we have now of massive injections of public money into private industry is like blood in the water for do nothing intermediaries. PBMs are just the assistant dean of underwater basketweaving for medicine.
I find it very hard to believe that if pensions didn't exist, nobody would have come along and exploited the same loopholes.
1. Taking advantage of a pricing inefficiency; and/or
2. Using local monopolies, inelastic demand and regulation to jack up prices.
But what powers PE is the LBO (leveraged buyout). That is, you buy csome company with borrowed money and then you borrow against the assets of that company to repay your original loan.. That... shouldn't be allowed. Obviously that company is saddled with debt and it's usually structured to explode at some future point when the buyers won't actually own it anymore. I think of it like subprime lending in a way.
Now passive funds kind of have to buy sufficiently large companies. This has been an issue with the SpaceX IPO because SpaceX is doing a small float (~5%) and NASDAQ has changed the rules to essentially force passive funds to buy SpaceX where up until now that wasn't the case unless at least 25% of the company was available to buy. It's so nakedly corrupt.
Anyway, if a LBOed company saddled with complicated debt gets re-listed it kind of has a captive market of buyers with passive funds.
So going back to (1) there is long historical precedent for pricing inefficiencies. I'm speaking about the corporate raiders of the 1980s. The movie Wall Street was about this era (well that and insider trading). Essentially ailing companies would be trading below their book value. The book value was simply the value of assets (real estate, etc) so you could buy the company, sell it for parts and make a profit. All the lost jobs be damned.
The companies that tend to get targeted for PE own real estate. This has been a competitive advantage because yet other rent-seekers can't exploit them by jacking up rents. But real estate is an easy asset to sell to pay back your LBO and you can even split the real estate into a separate company and lease it back from that company. It's just financial hocus pocus.