Maybe it's because they just don't understand economics

Democrats say that one of their top priorities when they take the controls of Congress in January will be to amend the Medicare drug prescription law to allow Medicare to negotiate with drug companies over the price of prescription drugs. Today the New York Times reports that the Bush administration will oppose this effort. The Administration's reasoning?

"[HHS] Secretary [Michael] Leavitt said he did not want the power to negotiate drug prices. “I don’t believe I can do a better job than an efficient market,” he said.

“We are seeing large-scale negotiations with drug manufacturers, but they are conducted by private drug plans, not by the government,” Mr. Leavitt said. “A robust marketplace with a lot of competitors has driven down prices. It’s the magic of the market. To assume that the government, in our genius, could improve on this belies the reality of a complex task.”

It's not an efficient market - the government grants patents to drug manufacturers to guarantee them a monopoly over their products! Open your copy of Lieberman and Hall's "Introduction to Economics" (second edition) to page 328, Figure 6. There you will see that the market price in the presence of monopoly is greater than marginal cost, the sine qua non of inefficiency. You will see that the government can improve efficiency by setting the price (either by fiat or using its power as a monopsonist in the market for prescription drugs) equal to long run average total cost. Having lots of HMOs with relatively small market share negotiate with the monopoly drug manufacturers cannot achieve the same outcome.