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The researchers figure the forgoing regulation cumulatively cut R&D by $188 billion through 2001. That cost 140 million life years and, depending on how one values human life, up to $21 trillion.

Had government more consciously restricted prices, say limiting drug prices to the consumer price index in 1980, between $265 billion and $293 billion of R&D would have been lost--almost one-third of actual industry expenditures. That would have knocked 330 to 365 drugs out of the market, with huge economic and human losses.

Transforming Medicare into a price control system would generate even higher costs. Say Giaccotto, Santerre, and Vernon: "The impact of price controls on Medicare drug purchases would be significantly greater in a much shorter period of time because they are deeper and because they would affect a larger segment of the pharmaceutical market and would send a negative signal to the hundreds of biotechnology firms that as yet have no revenues and that rely upon venture capital and pharmaceutical firm investment to sustain R&D activities."

The researchers figure the result would be a $372 billion or 40 percent drop in R&D outlays. That would mean a loss of 277 million life years.

How much should drugs cost? There is no right answer. Government will inevitably influence the marketplace, if nothing else through moral suasion and the possibility of political action.

Far worse, however, would be for government to promote price controls, whether enacted formally by legislation or implemented informally through market control. Warn Giaccotto, Santerre, and Vernon: "While the federal government's success in exerting downward pressure on real drug prices may have benefited consumers in the short run, because lower drug prices improve access to existing pharmaceuticals, this influence has undoubtedly come at the cost of reduced levels of pharmaceutical innovation."

The Medicare drug benefit has set a dangerous trap, tempting Washington politicians to try to force the pharmaceutical industry to provide more drugs for less money. Alas, there ain't no free lunch, whether in pharmaceuticals or life. If the federal government regulates drug prices, Americans will pay with their health and lives.

topics:
Trade, Health Care, John McCain, Medicaid, Medicare