Wednesday, August 31, 2016
Mylan didn't lower EpiPen Prices — they just appeared to
by Gaius Publius
These days have seen a number of stories about the Mylan EpiPen scandal, the essence of which is captured in the graphic at the top (note, though, that the graphic understates the EpiPen price; it's now around $640). Heather Bresch, Mylan's CEO, decided to increase corporate profit by increasing the price of a mature product, EpiPen, a device that delivers life-saving epinephrine to people who suffer life-threatening anaphylactic shock from allergic exposure to, for example, bee stings and peanuts.
In the view of most observers, she did it simply because she could.
West Virginia Democratic Senator Joe Manchin's daughter Heather Bresch, CEO of Mylan, and some of the work she's been doing. Note — the EpiPen price is actually around $640 at most pharmacies (source).
There's no economic reason for the price increases, any of them. Epinephrine (basically adrenalin) is not proprietary. As Dr. Lee Rogers notes in the first link below, "As a hormone, it's a product of nature and cannot be patented." And the delivery mechanism (the "pen") has been around since 1977. All of the R&D is done, and the medicine is cheap. All told, each EpiPen contains just one dollar worth of medicine. (And it seems the original EpiPen was at least partly developed with taxpayer money.)
Yet under Heather Bresch, Mylan has steadily raised the price from about $50, its price when Mylan acquired the 50-year-old product, to more than $600 — because they could. In 2009, the year Bresch became president, the price of the EpiPen was increased 19%, followed by 10% hikes each year from 2010 through 2013. Then:
After successfully pushing for legislation requiring all public schools to carry emergency epinephrine [devices], Mylan jacked up the price by 15 percent every other quarter from the end of 2013 to the second quarter of 2016 [emphasis mine].
And that's how the game is played.
A shakedown scheme with a sidecar of murder
As I noted here, this is basically a shakedown scheme with a sidecar of murder — "Got a peanut allergy? Pay my new price or the kid dies." In the meantime, corporate profit went through the roof, as did CEO compensation, as the graphic shows.
Dr. Lee Rogers, a medical doctor and former progressive House candidate, broke the story at DownWithTyranny:
There's a good follow-up here:
Two side wrinkles and you're up to date:
First, CEO Bresch may have engaged in insider trading when she sold over 100,000 shares of Mylan stock in advance of the latest price increases. As noted in the second link above, the stock price fell drastically after Dr. Rogers' piece was published.
Second, Bresch has taken Mylan through a corporate "inversion," a scheme by which a U.S. company buys a foreign subsidiary, then becomes a foreign corporation, with nothing else changing but its U.S. tax status. LA Times reporter Michael Hiltzik has written a full report on Mylan's inversion here.
Shamed by the scandal, Heather Bresch pretended to lower EpiPen's price
Mylan's price-gouging on its EpiPen business is indeed a scandal, not just on the business pages because of the sudden stock decline, but in the larger press because of the "vulture CEO" angle. Even MSNBC, which tends to keep hands off of Democrats, covered it, and tagged Sen. Joe Manchin in the story. (For more on Manchin and his responsibility for his daughter's career, do read Dr. Rogers' well researched story. Manchin's been involved at almost every stage of it.)
As a result of the horrible press, Mylan responded. It was initially reported that Mylan would lower the price of its EpiPen package by 50% in response to public outrage. For example, from The Hill:
EpiPen maker lowers price after uproar
I hope you noted that last sentence, in which Mylan says "higher deductibles have left patients picking up more of the cost of drugs like EpiPens." Remember, each EpiPen contains about $1 worth of medicine. Patients are actually picking up the cost of CEO Bresch's nearly 700% compensation increase.
The maker of EpiPens announced Thursday that it is reducing the price of the device following an uproar in Washington over the cost of the treatment for serious allergic reactions.
Mylan, the company that makes EpiPen, said it will provide a savings card worth up to $300 for people who had been paying the full price out-of-pocket, effectively reducing the cost by 50 percent.
The company is also making it easier to qualify for its patient assistance program, which eliminates out-of-pocket costs for uninsured and underinsured people....
Mylan announced the changed a day after Hillary Clinton denounced the company for hiking the cost of EpiPens 400 percent in recent years. Lawmakers on Capitol Hill had also sounded the alarm, sending letters to the company and to the Food and Drug Administration pressing for answers.
Mylan also pointed to insurance companies in its Thursday statement, noting that higher deductibles have left patients picking up more of the cost of drugs like EpiPens.
But it didn't take long for that "50% reduction in cost" claim to be more carefully looked at. For example, from USuncut:
EpiPen did not actually lower their price — it’s just another Pharma scam
The bottom line?
Mylan Pharmaceuticals is now running a slick PR campaign to try and convince Americans they lowered the price of the EpiPen. Don’t buy it.
On Thursday morning, it was widely reported that Mylan responded to consumer outrage by lowering the price of the drug by 50 percent. While that may be true on the surface, the company didn’t actually change the price at all. The drug company’s rollout of EpiPen price cuts only applies to uninsured and underinsured consumers, who are given a $300 savings card while still having to pay roughly $300 more for a [$640] package of two EpiPens.
However, the market price of the EpiPen remains the same.
And that's how the game is played.
This is Heather Manchin Bresch, by the way, in case you see her on the street. I'm sure she'd be glad to explain the numerous price increases at length. Maybe there's a nuance she can point you to that I've missed.
Mylan CEO Heather Bresch (source; photo credit Joe Wojcik)
Or maybe not. This really is shakedown scheme, with a sidecar of "or your kid dies." Is predator too strong a word for this behavior? Or is predation just business as usual in drug company CEO suites and the DC political offices that take their money?
Hate the drug companies? Support California's Prop 61 in November
If you think predator is not too strong a word for drug company "shakedown or death" profit schemes, consider supporting California's new Proposition 61, which will end Big Pharma's hold on unchecked and sky-high prices. Prop 61 is a serious attack on drug pricing, and it will work if it's passed. It will also appear in a number of other states if it's passed — hope for us all.
More on Prop 61 here.
(A version of this piece appeared at Down With Tyranny. GP article archive here.)
Gaius Publius 8/31/2016 07:30:00 AM