Editor’s Notes:

Americans are worried about unknown drug side effects—and they certainly want industry and the FDA to be as forthcoming as possible about what those risks might be. But Americans also demand that our doctors provide us with the latest and best medical technologies available—and that won’t happen if companies and investors face a market dominated by price controls or by drugs imported from countries with price controls.

The roots of the global pharmaceutical industry are European, with a proud history of science-driven drug research stretching back into the 19th century. In recent years, however, Europe has, by and large, made a conscious decision to under-invest in new medicines as a cost cutting measure, forcing patients to make do with older, less expensive drugs. The result is that Europe’s pharmaceutical industry is in steep decline, and investment is fleeing the continent in favor of U.S. markets.

Throughout Europe, pharmaceutical research and development are in retreat as companies and investment firms shift money to the United States, including the Philadelphia region. Nowhere is the trend more pronounced than in Germany, the world's third-largest market for prescription drugs. Here, price controls, importation of cheaper medicines, industry missteps and investor timidity have combined to undermine an industry that was once a global leader, said analysts, government officials and industry leaders.

As the U.S. government debates proposals to limit the cost of prescription drugs, some experts cite the German experience as a cautionary example of how price controls can backfire, causing an exodus of jobs and a decline in the introduction of new medications. "What people tend to forget is what a big deal the German pharmaceutical industry used to be. More than anyone else, they invented the pharmaceutical industry," said Jack Calfee, an economist with the American Enterprise Institute, a conservative think tank based in Washington. "Twenty-five years ago, our auto industry and our pharmaceutical industry were both trying to keep up with the Germans. Now, we are still trying to keep up with them on autos, but we are way ahead on pharmaceuticals."

Let’s consider it this way. Developing a new drug to treat diabetes—or cancer, or Alzheimer’s—is enormously risky and unpredictable. The drug might fail in clinical trials after tens (or even hundreds) of millions of dollars are spent on research. The drug might succeed in clinical trials but not get FDA approval. The drug may pass clinical trials and get FDA approval, but in the end be beaten to the market by a competitor with a similar drug who locks up market share.

Or a clever trial lawyer in Alabama might sue your company into oblivion on account of rare (or even hypothetical) side effects.

By refusing to place price controls on drugs, the U.S. has created a vital and powerful market for new medicines that add value to patients’ lives and encourages a steady stream of research and investment.

The German’s wouldn’t dream of putting price controls on Mercedes-Benz—and we shouldn’t impose them on pharmaceuticals.