Your argument is about as persuasive as the classic politician's argument that we can have lower taxes and higher spending—because we can cut government "waste." No one likes waste; everyone likes a free lunch; this formulation squares every circle you face. And of course, there is government waste and corporate waste. The trouble is there isn't enough of it to have the pain-free cure you want.
A couple of your smaller points: You say I have my facts wrong (again!) on NIH research. (I like that "again." But you have provided no other examples.) But I never claimed NIH research was being cut. Thanks mainly to Republicans, we have been ratcheting up NIH funding for the last few years, which is great. But it is still much less than a third of all pharmaceutical R&D, and most of it is, rightly, geared to basic research, not the esoteric stuff that homes in on medical cures. Without private R&D, we'd have far, far less pharmaceutical innovation. As for me-too drugs, I fail to see why providing new products with slightly different formulations and marginally better results is a function of "waste." Does that mean my Dell laptop 3800, as compared to a Dell laptop 3500, is "waste"? How dare these companies provide consumers with, gulp, choice? Don't they realize that according to the government five-year plan, we have no plans for such minor differences. Eliminate them! And I thought Soviet central planning was discredited. Not at the American Prospect! Ditto your idea that multinational pharmaceutical companies are flocking to the United States because of an industrial policy set up by Bob Dole. You don't think the Europeans subsidize drug companies? You don't think they have industrial policy? The truth is that nothing attracts investment like returns, and no system provides better returns than ours. This is the system you want to undermine with policies that have wrecked innovation everywhere else in the world.
Look, if doctors think these drugs are useless, they should refuse to prescribe them. And in order to help some pricing flexibility, I'm in favor of getting HMOs and insurance companies to charge not a flat co-payment for drugs, but a three-tier price system or even a percentage system so the consumer has a better sense of what she's getting and whether it's worth the price. But it's also important to keep some amount of choice of doctors in this scheme so a patient can simply tell her puritanical or left-wing doctor to stuff it and find a doc who'll prescribe a medicine the patient wants. Without that escape clause, we'll be back in the tender mercies of the far-from-omniscient medical profession. I also love your description of the government actually paying for products it buys as "a drug industry raid on the Treasury." Does that mean that every time I go to McDonald's for a No. 3 supersized, McDonald's is conducting a fast-food industry raid on my wallet? Your disdain for the people who risk their own money and time and work to provide goods for other people is dripping from your prose. The real question is: Why should the government not pay a market price for products developed with private venture capital at considerable risk?
Oh, and by the way, forgive me for forgetting the recession that occurred in 1993 and 1994. Somehow it passed me by. And yes, all the card-carrying leftists who write for the New York Times as objective "reporters" do bear some of the blame for goading politicians into chilling medical research with their relentless attacks on the drug industry. The shortened lives and multiple deaths that resulted in part from their desire to pummel this industry are things they will have to live with. Mercifully, I won't have to.
Your "solution" suggests that experts know better than patients and doctors what drugs to use and to pay for. I have no problem with the government deciding that it will assess which drugs it will dispense to its beneficiaries based on its own assessment of their merit. If big government doesn't want to give Claritin away for a small co-payment, fair enough. Ditto HMOs and insurance companies. This may slow research, and it probably will, and it will also probably cost us in the long run as a result, but it's a free country (despite your best efforts) and if a cash crunch means a research crunch, that's the way the market works. What I don't like is the idea of an overarching body deciding for the entire society which drugs are good for us and which are "waste." Let doctors and patients and HMOs decide that. Such decisions are best made by a variety of individuals pooling their small, collective wisdom, rather than some big body headed by someone like Ira Magaziner figuring out what's good for us all.
You close by mentioning the "skyrocketing" cost of drugs. As I pointed out, this is not a function of drug prices, which have lagged behind the CPI for many years. This is a function of demand—of people wanting these products because they think they will make our lives better. You don't like this and want to stop it. I see no problem with it. This is the 21st century. One of the greatest benefits of living today is the new leases on life and health that science and technology have given us. People are choosing with their wallets to take advantage of this. In some cases, our lives are at stake. Who on earth do you think you are that you think you have a right to stop us?