Investor's Business Daily

Those of us who live in the Golden State have grown used to our local politicians trying to solve problems by expanding government in unprecedented ways. But we could always take solace in the fact that our representatives in Washington were better grounded in reality.

But that was before San Francisco's Nancy Pelosi was elected Speaker of the House. Hardly had the new Congress begun session before legislation was introduced to allow the federal government to negotiate drug prices directly with pharmaceutical companies. The Medicare Prescription Drug Price Negotiation Act of2007 is being rushed to a floor vote on Friday, without public debate or even committee hearings.

Unfortunately, if Pelosi and her colleagues succeed, they will cause irreparable damage to our health care system - and harm everyone, not just seniors. That's because government"negotiations" are nothing but a political euphemism for price controls. If the federal government sets prices - or institutes a formulary that determines which drugs can be purchased - seniors would probably lose access to crucial medicines.

The problem with price controls is they can't account for the process whereby drugs are developed. Behind each pill's price tag is time and money that went toward research and development R&D is a huge investment - an average $1 billion per drug.

Market prices for drugs reflect these risky investments. Government-mandated prices do not. Quite literally, the difference is a matter of life and death.

University of Connecticut Center for Healthcare and Insurance Studies researchers recently found that since 1960, government interference in drug pricing caused $188 billion in lost R&D spending, which would have gone to develop new, perhaps lifesaving, drugs. These"lost" medicines could have saved 140 million life years.

The government now is barred from negotiating prices by noninterference legislation. Researchers, however, predict that should noninterference be repealed, R&D spending will drop almost 40% - producing a loss of 277 million life years.

As the Manhattan Institute's Benjamin Zycher recently estimated, the amount of money dedicated to pharmaceutical research and development will decrease by $196 billion from now through 2025 if Pelosi and her allies succeed. Considering the average cost of pharmaceutical development, that means 196 fewer new drugs over the next 18 years. And we would never know whether this lost research could have generated a cure for cancer or AIDS.

Government meddling in the marketplace can seriously affect even the drugs that are developed. A 1999 Boston Consulting Group study found that medicines take longer to reach patients in countries with price controls. The study noted, ''While governments try to achieve the lowest possible price, and companies hold out for a price they will accept, large segments of the population that may benefit substantially from the new treatments are left waiting."

In other words, while governments and companies haggle, sick people go without the drugs that could alleviate their suffering - or even save their lives. Without the preventive care that medicines can provide, these patients may face costly medical treatment with a much higher price tag than even the newest drugs.

It isn't even clear that revoking the noninterference clause would save money. The Centers for Medicare and Medicaid Services noted that ''both CBO (the Congressional Budget Office) and the CMS actuaries have estimated that a centralized drug benefit, with government price negotiation, would not yield lower drug costs compared t0 current law. Moreover, government controls could restrict access to needed medicines."

Further, price controls could actually increase costs for taxpayers. The CBO has estimated that striking the noninterference clause would increase the Medicare drug bill's costs by$18 billion through 2012.

In stark contrast to price controls, competition drives prices down and gives consumers more choices. Allowing dozens of companies to compete for seniors' business gives those companies an important incentive to negotiate better prices for the top drugs. Beneficiaries can pick and choose the plan best suited to their needs.

Most troubling, price control advocates often tout the Veterans Affairs' drug plan as a model for revamping Medicare Part D. Either they don't know - or don't care - that the VA system is so dangerously limited that it appears to halt veterans' life expectancy.

Only 19% of drugs approved by the FDA since 2000 are listed on the VA formulary, and only 38% of drugs approved in the 1990's are listed. That's why Medicare offers more than 4,300 drugs while the VA plan offers about 1,300.

This life-threatening lack of choice is what 42 million Medicare-eligible seniors - and perhaps eventually all of us - would face if the federal government mandates price controls on prescription drugs.

Sally C. Pipes is president and CEO of the San Francisco-based Pacific Research Institute and author of “Miracle Cure: How to Solve America’s Health-Care Crisis and Why Canada Isn’t the Answer.” She can be reached at spipes@pacificresearch.org.