By Rachel Sachs
For weeks now, the list price of Mylan’s EpiPen ($600 for a two-pack) has been exhaustively covered by journalists, debated by academics, and skewered by policymakers as an example of the pricing excesses of even generic pharmaceutical companies. Mylan’s latest response to the outrage? Announce that soon, it will be launching a generic EpiPen at a list price of $300 for a two-pack. I and others who study these issues full time cannot understand why Mylan thought this would work to quell the widespread indignation over its pricing practices.
The first red flag came when Mylan stated it would launch the product “in several weeks.” I often find myself defending the FDA against charges that it is too slow to approve new technologies, but let’s face it: it would be shocking news if they were able to approve a new version of anything in just a few weeks. Mylan has not had this in the works for months, so it seems that the new generic product is literally identical to the branded EpiPen – just with a different label. So, essentially, Mylan is preparing to cut the price of its product in half. (Even though that’s still higher than the price was just three years ago, before Mylan began its regular price hikes, and even though this should make us question their justifications for the $600 price.) Great, right? Not so fast.
What reasons (other than public relations) might Mylan have for introducing an authorized generic of this type and how might they attempt to use the two products to maintain their current level of revenues? By bringing the first generic EpiPen to market, Mylan has now planted its flag in the generics space. Although epinephrine (the drug inside the EpiPen) is now generic and cheap to produce and sell, companies do seem to find it difficult to replicate the device portion of the EpiPen, with Sanofi’s product recently removed from the market due to dosing issues and Teva’s application for a generic denied by the FDA with no public explanation just a few months ago. Mylan has now benchmarked a new price for those products if they return – they must price below $300 for a two-pack to compete effectively with Mylan.
Second, given Mylan’s behavior so far, I have to wonder whether they are taking steps to ensure that their branded product retains a large portion of the market share. I wonder whether their generic will be fully substitutable by pharmacists, a question which may depend on the state laws involved (and which Mylan has lobbied to influence). I wonder whether the EpiPen comes with training or other easy-to-use tools that will be missing from the generic, and as long as Mylan provides copay coupons only for the branded product, parents facing equivalent copays in either situation will choose the branded EpiPen. I wonder whether Mylan will not offer discounts off the list price for the generic (except those required by law for Medicaid), meaning that the actual prices paid by insurers will be roughly comparable. And finally, because a significant portion of EpiPen purchasing happens during the back-to-school season, Mylan has done little harm to its revenues this year. It is only next year that this product may affect their bottom line.
Every day, I get to go to work and I think about issues of pharmaceutical innovation and access to medicines. I am not shocked by Mylan’s actions here, and it is arguably not even the worst offender in the game of jacking up prices on old drugs (insulin has received attention recently for this practice). In my view, some drugs – particularly some new drugs – deserve to be expensive. (I’m on record here talking about Sovaldi, and I’ve even argued that for some drugs, we should be paying more as a quasi-prize to encourage investment.) The EpiPen and others should not be.
I don’t think pharmaceutical companies are evil. I think they are what we have made them. We’ve created a legal system in which companies like Mylan, Valeant, and Turing Pharmaceuticals can reap revenues which are outsized compared to their investments, their value to patients, or any other reasonable metric that is commonly considered.
My real concern here is that we seemingly lack the political stomach to do anything about the set of high drug prices that are problematic, to the extent we can agree on that set. (No, telling the FDA to speed up review of single-source generics doesn’t magically solve the problem.) We have no shortage of proposals, even if I’m skeptical of some. Public shaming seems effective, but publicly shaming individual manufacturers won’t change the underlying dynamics. We could start by providing information, as with some of the recent price/cost transparency bills or with the work done by groups like ICER.
However, these efforts are really precursors to price controls. We should not think of “price controls” as a four-letter word. Price controls come in many forms, and we have many of them operating in the law right now. We could act to prevent price increases over time, a step that has been taken in Medicaid already. We could nudge providers to care about prices through projects like the proposed Part B demo. Giving Medicare both negotiating authority and formulary-setting power would qualify as “price controls,” in my view.
These approaches all have pros and cons. Would preventing price increases over time just lead to higher initial prices? What would the effect on future innovation be from a law that imposed some sort of price control, either directly or by creating formulary pressure in different ways? I understand the considerations involved here. But the outrage over actions like Mylan’s must come with a prescription for change. If not, it is a matter of when, not if, this will happen again.