Democrats divided over health care

Despite all the media gushing over a compromise among Democrats regarding the public option, no one but Senate Majority Leader Harry Reid knows exactly what the compromise will contain, let alone whether skittish Democrats will buy into it. Even the second-ranking Democrat in the Senate, Richard J. Durbin of Illinois, had to confess on Friday in response to Sen. John McCain, "I would say to the senator from Arizona that I am in the dark almost as much as he is, and I am in the leadership."

But this much is known: The Democratic bill will not reduce health care costs. Richard S. Foster, chief actuary of the federal Centers for Medicare and Medicaid Services, reported on Friday that the current Reid bill would add $235 billion in spending. The death knell for the proposal probably came Friday when Sen. Joe Lieberman, Connecticut independent, told Mr. Reid that he couldn't support the dramatic proposed expansion of Medicare coverage.

There is yet another stumbling block that involves Democrats: the issue of drug reimportation. As a candidate, Barack Obama promised last year that when he became president, Americans would be able to buy drugs sold in other countries. However, now that he's in the White House, he has changed his mind and cut a deal with the pharmaceutical companies, which in return promised to spend at least $150 million to push his party's health care legislation. The Obama backroom deal has caused a deep rift among Senate Democrats, and an amendment that would allow reimportation has stalled debate for days.

This is more than a political problem. At issue is how to finance the research and development of future pharmaceutical products. Drugs sold in other countries are cheap because of price controls, as drug companies get back just a little more than the cost of producing each pill. The artificially low prices mean that foreign consumers contribute little, if anything, toward the large investments pharmaceutical companies make to develop and launch new drugs. These companies hence earn most of their profits in the United States, where the market - for the time being - is allowed to set prices.

Because of the artificially low prices elsewhere, American patients subsidize most of the world, which is unfair, but the best solution isn't to allow foreign price controls to invade our borders through reimportation. Instead, through international negotiations, Washington ought to pressure other countries from their current free-riding. At present, socialist foreigners get it both ways: They get current drugs at low cost and still get access to new drugs developed with money coming from American patients' pockets.

With reimportation, Americans would get drugs cheaply, but the dollars saved over the short term would come at the expense of dramatically reducing the development of new drugs. Reduced pharmaceutical profits mean reduced investment in developing new drugs. Fewer new drugs mean lives will be lost that could have been saved. Even a few Democrats understand that market rationale, which is why Mr. Reid is having difficulty ramming through his government health care bill.