Andrew Cuomo is proposing a plan intended to reduce the cost of prescription drugs in New York State by allowing private Health Maintenance Organizations, insurance companies, hospitals, and drug stores to join a state purchasing pool that already includes Medicaid and the state’s Elderly Pharmaceutical Insurance Coverage program. We would suggest that if Mr. Cuomo wants to be in the business of negotiating large drug purchases, perhaps he could go to work for an HMO. Or, if he admires Canada’s low drug prices as much as his recent pub lic statements suggest, perhaps he’d be better off emigrating to the dominion and making a run for Prime Minister. Either solution would be preferable to his running for governor of New York on a platform that includes bringing further state interference into the market for prescription drugs.

Mr. Cuomo, like many politicians who make hay out of the prescription drug issue, is using the hobgoblin of low Canadian prescription drug prices to try to sell Americans on the idea that we are paying too much. If Claritin costs $20.01 a month in Canada, Mr. Cuomo asks, why should it cost $100.65 a month in New York City? The question is nonsense, and Mr. Cuomo could not be unaware of the reasons why. Our neighbors to the north haven’t devised a miraculous way to make drugs cost less, they have simply controlled prices by force of the state. Patented drugs’ prices are chopped down in Canada by the Patented Medicine Prices Review Board, which mandates that new drug prices can’t be higher than the price of an existing treatment for a particular disease — or in the case of breakthrough drugs, the price can’t be higher than the average charged in a list of countries, most of which have price controls of their own.

So why do drug companies sell in Canada and other price-controlled markets at all? Because so long as the controlled price is higher than the cost of manufacturing the physical pills, the companies are better off doing business than not. But manufacturing costs are a small fraction of the total costs of bringing a drug to market. It typically costs between $300 million and $500 million to bring a drug to market, and fewer than a third of all drugs developed ever turn a profit. While the Canadians may cover the manufacturing costs of the drugs they buy, someone needs to cover the research and development costs — and since America is the only major industrialized country not to institute price controls, that burden largely falls on the American consumer. No wonder America creates about half of all the new drugs in the world.

While Mr. Cuomo’s plan falls short of instituting price controls, it is avowedly intended to squeeze pharmaceutical companies. “They are making an extraordinary profit here in the state of New York and there is no need for it,” Mr. Cuomo said on the steps of City Hall yesterday. “We’re just talking about a reduction of the profits here,” he added. Apparently, Mr. Cuomo is one of those who believe that drug company profits can be shaved substantially without so much as nicking the firms’ investment in research and development. Higher profits mean more capital. And while more capital does not automatically translate into more R&D, no pharmaceutical company that wants to be in business a few years from now is failing to invest in its future — and incidentally in the health of all drug consumers.