“Americans spend too much on health care.” “We have worse health outcomes than our European counterparts.” Talking points such as these helped drive President Obama’s controversial and sweeping health care reform into law two years ago. But are they accurate?

Should the government negotiate the prices of pharmaceuticals covered by the new Medicare Part D prescription drug benefit? The incoming Democratic leadership in Congress has made Medicare price negotiation a top policy priority, but controversy rages over precisely what that might entail and whether it would reduce drug costs in...