Over the last several years there have been several instances of pharmaceutical companies increasing the price of its drugs by unfathomable proportions. The most renowned example was Turing Pharmaceuticals’ 5,000% price hike for its antiparasitic drug, Daraprim, causing CEO Martin Shkreli to become the “most hated man in America.” Most of these price increases went under the radar to the average consumer since the drugs involved were medications that hospitals give to inpatients. The most recent price scandal, involving Mylan NV’s (NASDAQ:MYL) EpiPen, received a heightened amount of media attention as over 4 million Americans use this injector on a daily basis.
The EpiPen is a pen-shaped device containing epinephrine, or adrenaline, that is self-administered in a person’s thigh. It is used to prevent someone from going into anaphylaxis, a reaction that can cause swelling in the airways when they are having a severe allergic reaction. This swelling can cause unconsciousness and in the worst case, death. The adrenaline relaxes the muscles and allows the constrained airways to open up; this gives the patient more time to get proper medical treatment.
Mylan acquired the rights to the EpiPen line in 2007 from Merck KGaA; at the time a pack of two EpiPens cost $100. Since then, the price has jumped to $600, a 500% from 9 years ago. Mylan could hike prices without the fear of declining sales because of the near-monopoly it has for the product. There are several alternatives that contain similar active ingredients, but most doctors will not prescribe them due to differences in the chemical formula. In the past there has been indications of alternatives hitting the market but ultimately the drugs weren’t successful. Sanofi SA withdrew its generic from the market this past year and Israel-based Teva Pharmaceutical’s alternative wasn’t approved by the FDA.
The price increase has had a bigger effect on consumers than previous drug price hikes because patients with a high health insurance deductible bear the brunt of the cost for EpiPens. The cost has become so unbearable that certain EMTs and firefighters are being taught how to use a standard syringe instead of using EpiPens. To make matters worse, during the time that EpiPens prices went up by 500%, executives at Mylan have experienced significant increases in their salaries. CEO Heather Bresch has seen her salary go from $2.5 million to $18.9 million, a 600% increase. Mylan claims that middlemen and suppliers forced them to increase prices, but this past week two industry insiders challenged this claim and said that the company pays no more than $30 per EpiPen.
Mylan recently gave into the bad press and began initiatives to decrease the cost of its product. They are now offering vouchers to reduce the amount consumers pay out of pocket. Critics claim that these vouchers aren’t good enough because they do not apply for insurers and government programs. Additionally, Mylan is launching a cheaper generic EpiPen brand that will cost $300 for 2 EpiPens and it is increasing the amount of patients that will receive financial assistance.
While these initiatives may help out Mylan’s public image problems, the company may now have legal problems on its hands. This past week the Senate announced that it is beginning a probe into Mylan’s pricing of the EpiPen. Senators Rob Portman and Claire McCaskill released a statement saying, “Our review of this matter will be robust, thorough, and bipartisan. Parents and school districts in Ohio, Missouri and across the country need affordable access to this life-saving drug, and we share their concern over Mylan’s sustained price increases.”
Additionally, as the price of EpiPens rose, schools turned to Mylan’s ‘EpiPen4Schools’ program to receive discounted EpiPens. Some schools were required to sign a contract that prohibited the schools from purchasing products from Mylan competitors for 12 months. The New York Attorney General, Eric Schneiderman, announced that he is beginning an investigation into Mylan about whether this act broke antitrust laws.