The Mylan Dilemma
Asthma is a respiratory condition marked by spasms in the bronchi of the lungs, causing difficulty in breathing which usually results from an allergic reaction or other forms of hypersensitivity. When the symptoms of asthma get too severe, the results can often be fatal. Once the symptoms reach a certain severity, it takes an injection of epinephrine to subdue them. This injection is done with the use of an EpiPen. EpiPen is mainly produced by one company called Mylan who deal with very little competition within their industry. Over the past decade, Mylan has increased the price of EpiPen by over 500 percent. After receiving scrutiny and a drop in stock price, Mylan released a generic version priced at $300.
EpiPen has gone from $100 for a two-pack in 2009 to over $600 today. The reason that this caused such an outrage is that a lot of the consumers became unable to purchase the product even with insurance. For someone whose life depends on this product, not being able to afford it is a very big issue. According to Daniel Kozarich, a senior pricing consultant for Vendavo, “In 2015, Mylan reported a net profit margin of 8.9%, but some speculate the margin for the EpiPen was closer to 55%”. This explains why so many people speculate that the reasoning for increasing the price was for profit. It is unethical to profit off a person’s life or death need which causes a lot of controversies when dealing with the selling of pharmaceuticals at such a high level as Mylan. With more research, I found that the salaries of Executives within the company also had a very steep increase. Ben Popken, a journalist for NBC News, claims that “Proxy filings show that from 2007 to 2015, Mylan CEO Heather Bresch’s total compensation went from $2,453,456 to $18,931,068, a 671 percent increase. During the same period, the company raised EpiPen prices, with the average wholesale price going from $56.64 to $317.82, a 461 percent increase, according to data provided by Connecture.” That is a big increase in her bottom line that could cause a lot of people to question her ethics. You might be asking why and how they did this to their consumers. In 2016, Mylan CEO Heather Bresch was called before Congress to explain the price increase. According to CBS News, when asked why they decided to increase the price of the EpiPen, Bresch replied,
“Because we realized there was an unmet need. … And so we made a conscious decision, the board, we put a business plan together to invest, to build public awareness and access,” Bresch said. “We’re now in over 70,000 schools across America. We’ve donated more than 800,000 free EpiPens… and remember that that price incorporates the entire supply chain. But it was that investment over the last eight years that would allow us to reach patients and save lives.” (CBS News, 2017)
Bresch is saying that Mylan making the product more accessible led to the product becoming more expensive as well. They invested so much money over the past decade that it raised the price to around six-times as much as the original price was. It is believed that it is unfair for the consumers because, even though Mylan gave away a lot of free EpiPens for schools and hospitals, the people who buy personal EpiPens for emergencies are paying a lot more now without having a voice in the decision. But how can a company raise their prices by this much and still compete with their competitors?
The auto-injector has been used for medicinal applications since the 70’s to protect soldiers from chemical warfare. But Mylan has been dominant in the anti-allergy auto-injector category for a long time using the EpiPen because of the unique design that they have patented until 2025. The patent protects the company’s bright orange cap that covers the needle but releases automatically when a patient pushes an EpiPen against their thigh. It is a much easier and quicker way of getting the medicine needed to survive in a time of crisis. This feature has made it EpiPen familiar and trusted by all kinds of medical professionals which makes it difficult for competitors to enter and thrive in the market. According to Dan Mangan, a reporter for CNBC news, “Mylan’s dominant position in the market was cemented in late 2015 when Sanofi recalled the competing product Auvi-Q — which had only been on sale in the United States since 2013 — after problems were identified in its delivery of the correct dosage of the drug.” This gave Mylan almost complete dominance over the industry as they were getting over 95% of the prescriptions in 2016. This sort of monopolistic stance is why Mylan was so heavily scrutinized after increasing the price of the EpiPen. Consumers felt as if Mylan was leaving them with no alternatives because of the control that they had on the industry.
Mylan ended up facing a lawsuit of $465 million for overcharging the government for EpiPen and later released a generic version of the EpiPen for $300. You would expect them to lower the prices after receiving such a harsh penalty but according to Kasandra Brabaw, a journalist for Refinery29, “Two pharmacists in New York City confirmed to Refinery29 that EpiPen can cost more than it did last year. A CVS pharmacy sells EpiPen for about $650 and a Duane Reade pharmacy told us they sell it for about $735.” This is simply Mylan using its monopolistic authority over the market that it has been thriving in for so long now. One of the best ways to slow a monopoly down is to give it a competition. The drugstore chain announced that it will sell a generic version of Impax Laboratories adrenalin treatment for $109.99 per two-pack, down from $200. Impax Laboratories gained a lot of customers after Mylan increased their prices. Cigna, a top insurer, announced that it was dropping coverage of the EpiPen and would cover only the $300 generic version. This was done to give consumers more options and to bring Mylan closer to Earth.
It is easy to see that Mylan lost a lot by increasing the price of EpiPen. They lost trust in their consumers and have worsened the image of their company. They will never be able to make a price change again without extreme scrutiny. Many professionals disagree with the decision to increase the price by that much and view it as unethical due to the way it affected the consumers. The judicial system thinks that the punishment was enough and that the government should attempt to regulate the pharmaceutical industry to avoid another issue of this caliber. What do you think?
News, CBS. “Mylan CEO on EpiPen drug price controversy: “I get the outrage”.” CBS News, CBS Interactive, 27 Jan. 2017, www.cbsnews.com/news/epipen-price-hike-controversy-mylan-ceo-heather-bresch-speaks-out/.
Kozarich, Daniel. “Mylan’s EpiPen Pricing Crossed Ethical Boundaries.” Fortune, Morningstar, Inc, 27 Sept. 2016, fortune.com/2016/09/27/mylan-epipen-heather-bresch/.
Popken, Ben. “Mylan CEOs Pay Rose Over 600 Percent as EpiPen Price Rose 400 Percent.” NBCNews.com, NBCUniversal News Group, 23 Aug. 2016, www.nbcnews.com/business/consumer/mylan-execs-gave-themselves-raises-they-hiked-epipen-prices-n636591.
Brabaw, Kasandra. “This Life-Saving Drug Is Quietly Getting More & More Expensive.” Mylan Increase Epipen Cost Drug Price Outrage Allergies, Refinery29 Inc, 1 Sept. 2017, www.refinery29.com/2017/09/170612/epipen-price-increase-outrage.
Mangan, Dan. “EpiPen competition grows: Alternatives to anti-Allergy device see big jump in prescriptions in 2017.” CNBC, CNBC, 6 Mar. 2017, www.cnbc.com/2017/03/06/epipen-rival-allergy-devices-see-increase-in-prescriptions.html.
Dyer, Owen. “Mylan Settles for Overcharging in Suit Brought by EpiPen Competitor.”BMJ: British Medical Journal (Online), vol. 358, 2017. ProQuest, https://login.proxy094.nclive.org/login?url=https://search.proquest.com/docview/1931124906?accountid=11741, doi:http://dx.doi.org/10.1136/bmj.j3948.