June 6, 2017 – A year ago, consumers and congressmen alike were shocked when Mylan raised the price of its EpiPen by 574%. Nothing has changed in the year since.
The EpiPen has been around for decades—the device, known as an autoinjector was acquired by Mylan Pharmaceuticals (NASDAQ: MYL) in 2007, and cost about $57 each at that time. Today, EpiPens cost $609 for a twin-pack, with each device delivering $1-worth of epinephrine to combat life-threatening allergic reactions, and by 2015 sales of EpiPen represented 40% of Mylan’s profits.
Mylan has increased the list price of 17 times despite widespread media coverage, consumer complaints, and congressional inquiries that labeled its business practices “disgusting” and “disgraceful.” Now, a class-action lawsuit is claiming that Mylan is guilty of violations of consumer protection laws and the Racketeer Influenced and Corrupt Organizations Act.
The suit claims that the “skyrocketing” list price of EpiPen is the result of Mylan’s payments of rebates to pharmacy benefits managers, including CVS, Caremark, Express Scripts and Optum Rx. The suit claims that both sides had an interest in driving up the price and that competing devices never has a chance, because they could not or would not pay the same level of rebates that Mylan was paying.
Mylan blames a broken health care system full of inefficiencies for the high prices that plague consumers. The PBMs meanwhile, speaking through their trade organization, have said, “Mylan has spent the past year blaming Washington, the prescription drug supply chain, and competitors for its unusual pricing practices. It’s time for them to look in the mirror and take responsibility.”
Profiteering at the Expense of Sick Children and Adults
We live in a world of market realities. Drugmakers like Mylan should be able to “do good and do well” as their CEO has said. But the market is also vulnerable to collusion and other forces that allow price gouging, as the lawsuit against them suggests. And if the racketeering charges weren’t bad enough, regulators recently revealed that Mylan had likely overcharged Medicaid by $1.27 billion for EpiPens.
When does profit become profiteering?
What about Mylan’s online coupons, which shifts the inflated cost of EpiPen to insurers and self-funded employer plans?
What should regulators do about the fact that Mylan has an effective monopoly on a lifesaving product, which allows the company to play “rope-a-dope” (as Georgia Representative Elijah Cummings put it) with all the bad press and move on without making any changes?
We’ve put together some sources below for further reading. In the meantime, for parents of sick children, the options are limited. EpiPens have an expiration of one year, which means that if the patient doesn’t have a life-threatening allergic reaction in a given year (obviously a good thing), they are out of pocket yet again—hundreds of dollars for a device that delivers just $1 worth of drug.
Read Charles Duhigg’s excellent column in the New York Times here:
Read about the congressional hearings here:
Read about the racketeering suit filed against Mylan here:
Read Emily Willingham’s excellent analysis of Mylan’s marketing in Forbes: