The spiraling price of the EpiPen injector — a staple of backpacks and school nurses’ offices everywhere — is only the latest version of a destructive story: A drug company scoops up the rights to a medicine that’s been around for years, concocts an aggressive new business plan, and inflates the price by an obscene amount. Remember Martin Shkreli, who increased by 5,000 percent the cost of a 62-year-old pill to treat parasitic infections?
The recent $100 price hike for the EpiPen, a device that conveniently delivers the drug epinephrine to counteract severe allergic reactions, isn’t quite as steep. But the basic strategy is just as shameless.
The patent holder Mylan, which acquired the rights to EpiPen from Merck KGaA in 2007, isn’t using its new revenues to invent new ways of saving lives. The device isn’t getting any harder to manufacture. The epinephrine inside it only costs about $1. The company is just padding its margins by gaming the insurance system and exploiting other inefficiencies in US health care — at the expense of patients and everyone else who pays health care premiums.
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Developing a new drug or device requires exhausting research and hundreds of millions of dollars, with slim odds of success in the end. It’s simpler to purchase an existing product, generate more volume through slick marketing, and then squeeze more money out of customers. In real dollars, the EpiPen’s price has risen by about 450 percent since 2004, to $600 or more for a pack of two.
For those allergic to bee stings or certain foods, the EpiPen can be a lifesaver. That makes it an easy sell. It lands on many back-to-school shopping lists, and it’s pitched as “the brand more school nurses have been trained on and taught to administer.” Mylan sold 3.6 million EpiPens in 2015, reaping more than $1 billion, and it will likely unload at least that many this year — the injectors are supposed to be replaced every 12 months.
Mylan lucked out last fall when global drug giant Sanofi had to recall its competing device, and again when the Food and Drug Administration rejected a generic version of the EpiPen. In general, the FDA’s progress in reviewing generic drugs has been slow — a boon to patent holders like Mylan, because long regulatory delays discourage companies from trying to bring new generics to market. The lack of competition has allowed Mylan to raise the EpiPen’s price repeatedly, with no repercussions.
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The company also has used the impenetrable health insurance system to disguise the EpiPen’s actual cost. In a statement in response to mounting criticism, Mylan said this week that “nearly 80 percent of commercially insured patients” who used a company-supplied copay coupon last year received an EpiPen “for $0.” But it’s a deceptive deal, as insurers still pass on the costs through more expensive premiums for all.
If nothing else, Mylan’s scheme becomes harder to conceal as more Americans shift to plans with big deductibles and copays. In the long term, the Affordable Care Act should reduce the perverse incentives within the insurance system — if Congress builds on the law’s reforms, rather than whittling them down. Lawmakers can also help the situation by giving the FDA the direction and the funding necessary to speed up the introduction of generic drugs of all sorts.
In the short term, Mylan needs to hear from angry consumers and from the pols who represent them. As it happens, Mylan’s chief executive, Heather Bresch, is the daughter of Senator Joe Manchin of West Virginia, but that shouldn’t get the company off the hook. Senator Amy Klobuchar, a Minnesota Democrat, wants a Federal Trade Commission investigation into the EpiPen episode. Senator Chuck Grassley of Iowa is demanding that the company explain its actions. In the court of public opinion, “we did it because we could” just doesn’t cut it.