I recently wrote about the media frenzy surrounding pharmaceutical firm Mylan, which is under fire for what many are calling price gouging. The company has, in fact, raised the price of its allergy autoinjector EpiPen over the past decade by around 500%, to $600 and up for a two-pack. In response to the widespread furor, Mylan announced it would offer discounts of up to 50% on the product to help consumers cover its cost. Then, in a bit of a surprise move, Mylan said it would launch a generic version of the EpiPen while keeping the full-priced version on the market. One can’t help but ask, though, why the company doesn’t just drop the price of the original product?
I’m not sure this move is going to be satisfactory to the company’s critics. Many of them are unimpressed, including a group of 20 US senators who responded by sending a letter to Mylan CEO Heather Bresch questioning Mylan’s efforts. Consumer rights group Public Citizen president Robert Weissman said that the plan is “not good enough” and that Mylan should just cut the EpiPen’s price.
It stands to reason that Mylan will have both the branded and the generic versions on the market because it fully expects to continue selling the higher-priced product to certain buyers. For example, will all pharmacy benefit managers (PBMs) — the companies that provide prescription benefits for most Americans — supply the generic version? (Answer: No, some will stick with the original, whether by choice or by corporate rules or agreements.) What about physicians that aren’t aware of the generic option? Or don’t trust that it will be equally effective as the brand they’re already comfortable with?
Mylan could be positioning itself to make more revenue from the generic than it makes from the branded EpiPen. Although it will be marketed at half the EpiPen’s price, Mylan won’t have to offer coupons or rebates for the generic, so it could net more per unit sold in the end.
The launch of a generic EpiPen might also be seen as a calculated move to preemptively grab some of Teva Pharmaceuticals’ market share. Teva is preparing to launch its own generic version of the product next year. Even if Teva prices its injector at a lower rate than Mylan’s generic, the company will have lost valuable months on the market, during which purchasing agreements will have been settled.
PBMs have come under fire for allegedly striking deals with drugmakers to encourage insurance companies and employers to purchase more expensive products — even when equally effective and cheaper alternatives are available. Earlier this year insurance giant Anthem filed suit against PBM Express Scripts for failing to renegotiate lower prices for prescriptions, effectively overcharging it some $3 billion. (Express Scripts responded by filing a countersuit against Anthem, saying that the insurer rejected renegotiation proposals.) Behind-the-scenes deals are regularly struck, leaving consumers in the dark about whether they’re being ripped off.
There is a serious lack of transparency in pricing prescription drugs. It seems that nobody fully understands the complex rules of the game, and it’s anybody’s guess whether consumers are getting a fair deal.
With allergies on the rise around the world, many families have come to rely on the life-saving capabilities of epinephrine, the active ingredient in EpiPen. For Mylan to exponentially increase the price of the EpiPen — while holding a near monopoly on the epinephrine market, while raising its CEO’s salary by more than 600%, while saving on taxes by moving its headquarters to the Netherlands — provides plenty of fodder for a public and political eye that is already suspicious and, in fact, fed up.
Will these steps taken by Mylan be enough to turn the tide of negative press? I don’t think so.
Diane Ramirez has been a member of the D&B editorial department for more than a decade. She currently covers the health care and insurance industries for Hoover’s.