Substitute "outside auditors" for "private testing lab" in the first part of your post, and the arguments don't seem so compelling. Sure, Anderson got caught...eventually. But clearly they wouldn't have started cheating some time back if they hadn't calculated that they could get away with it for a long time. The generic argument that business is self-regulating because of fear of negative consequences doesn't take into account that risk-benefit analysis is a natural part of any business decision, including decisions about whether to break the law or sell defective products (in the case of the latter, projections of lawsuit costs are built into the price in a grim calculus of the value of human life as a business expense).

I'm not too wedded to the in-house testing idea myself...transcribed it in realtime as it materialized. This is just a nit, but

Why should the taxpayer pick up the costs for making drugs? And then if the final product is disposed of according to government edict, what's the difference if we just up and nationalize the drug companies?

I wasn't saying that the government would simply confiscate a percentage of future production. I was suggesting that in exchange for the government footing the bill for testing--thus enabling smaller players to afford it-- the government would be reimbursed later by a percentage of future production. A trade, not a tax.

--Robert