Goose-killers.

THE latest crusade in Washington seeks to do to the pharmaceutical-drug industry what trial lawyers and Naderites did to the tobacco and asbestos producers in the 1990s: demonize them and then milk them dry of every dollar of profits. A key difference, of course, is that while tobacco and asbestos are dangerous to human health, drugs save lives--millions of them. It would be difficult to identify a single industry that has done more over the past century to improve life on earth.

That's not the way Rep. Gil Gutknecht (R., Minn.) and most of his congressional colleagues see it. Gutknecht has been shouting about the high prices of prescription drugs and he routinely lambastes the industry for "shameful profiteering." He and Sen. Byron Dorgan (D., N.D.) are advancing legislation to impose a back-door form of price controls on the drug industry. In the wake of last year's Medicare prescription-drug-benefit bill, the price-controls bill is now sprinting through Congress.

The drug industry has itself partially to blame for this fiasco. The pharmaceutical association foolishly supported the Medicare expansion bill, and should have seen this train wreck coming. It didn't take a great stretch of the imagination to predict that once the government became a primary payer for prescription drugs, it would not be long before Congress felt an irresistible urge to begin regulating the prices. (Government has already imposed price controls on many doctor and hospital services paid for by Medicare.)

One proposal currently gaining steam would repeal a federal law that prevents the government from setting drug prices. An even more insidious bill in the Senate would not only allow the reimportation of drugs from Canada at their government-controlled cut-rate prices, but require U.S. drug firms to sell as many of the drugs as the Canadians want at that price. This forced-sales provision is a clear "taking" of private property--and yet it has support even among many Republicans.

Normally sane legislators embrace these foolhardy policies partly because of the myth that prescription drugs are too expensive. Gutknecht likes to point to anti-stroke drugs that cost $69 a bottle in the U.S., but only half that in Canada. The problem is, it costs the industry an estimated $400 million in research and development to put a new drug on the market. Is $69 too much to pay for a wonder drug that didn't exist ten years ago and prevents fatalities? If you sweat profits out of the industry, where does the venture capital come from to develop the next generation of cures? Virtually every organization that lobbies for finding cures for deadly and crippling diseases--from the American Cancer Society to AIDS victims groups--understands that price controls slow the race for the cure, and thus are dangerous to our health.

Strong evidence points to the severe harm price controls have done to the pharmaceutical industry in other industrialized nations. The chart nearby shows that the U.S. has come to dominate the pharmaceutical market in recent years, precisely because we are virtually the only nation left that does not impose ceilings on profits. European drug companies say price controls have caused R&D dollars to flow to America. We should learn from the mistakes of the Europeans and the Canadians; if the U.S. imposes price controls, there is no place left for this industry to go.

THE GOOSE THAT LAYS GOLDEN EGGS

PERCENT OF NEW DRUGS DEVELOPED WORLDWIDE

          No Price Controls   Price    Controls

                U.S.          Europe    Japan

1989-93          22%           46%       31%
1994-98          33%           40%       24%
1999-03          43%           36%       16%

SOURCE: EUROPEAN FEDERATION OF PHARMACEUTICAL INDUSTRIES
AND ASSOC. 2004.