I’m sure that we’ve all noticed the Epipen saga and that Mylan CEO Heather Bresch is the new Martin Shkreli #PharmaBros&Hoes.
The basic scandal:
- Mylan owns the patent for Epipen, having bought it in 2007 from a division of German pharmaceutical company, Merck.
- Merck was selling the Epipens for $7 each.
- Mylan started selling the Epipens in packs of 2.
- It has spent the last eight years or so campaigning to have the Epipen included in all schools, amusement parks, etc.
- [Let’s just mention that this ‘awareness’ campaign is repeat business from Mylan – because Epipens have a year long shelf life #repeatbusiness].
- Since Mylan took over, the price of a pack of Epipen (2 of them) has scaled up to a list price of $608.
So people noticed, and Heather decided to go onto Squawk Box to explain herself. Some extracts from the transcript that are painfully hysterical:
AS A MOTHER, I CAN ASSURE YOU THE LAST THING THAT WE WOULD EVER WANT IS NO ONE TO HAVE THEIR EPIPEN DUE TO PRICE.
But if it happens, ‘blame the system’, because of all the middlemen:
I KNOW THIS IS A COMPLICATED CONVERSATION AROUND HEALTH CARE AND INSURANCE, THAT THE $600 IS A LIST PRICE. THAT $608 IS A LIST PRICE. WHAT MYLAN TAKES FROM THAT, OUR NET SALES IS $274. SO $137 PER PEN. AND AGAINST THAT, MANUFACTURING THE PRODUCT, DISTRIBUTING THE PRODUCT, ENHANCING THE PRODUCT, INVESTING.
Oh, and did we mention that Mylan obviously deserves its higher prices, because of all the awareness it has raised in selling more Epipens? That business model be awesome: if you sell more, then you should charge a higher price to do so…
SULLIVAN: BECAUSE I’VE READ, AND YOU HEAR, THAT YOUR COST OF THE EPIPEN IS PROBABLY LIKE $3.
BRESCH: LOOK. WE HAVE – IF YOU LOOK AT THE AUTO INJECTOR, WE HAVE MADE CHANGES. WE NEED PROTECT IT SO YOU DON’T SEE THAT NEEDLE. THE EASE OF USE. WHEN YOU ARE IN ANAPHYLACTIC EVENT, YOU NEED THE EXACT RIGHT AMOUNT OF EPINEPHRINE IN SECONDS. AND THAT’S WHAT OUR AUTO INJECTOR DOES. SAFELY AND IT NEEDS TO WORK EVERY TIME.
Right. So $3 to produce, $134 for not being able to see the needle, and the rest is for ‘other people’.
SULLIVAN: BUT SURELY, HEATHER, SURELY YOU MUST UNDERSTAND THE OUTRAGE. AS SOMEBODY I TALKED TO LAST NIGHT SAID, PEOPLE ARE OUTRAGED BECAUSE IT SEEMS OUTRAGEOUS. THAT THE AMERICAN MEDICAL ASSOCIATION HAS SAID THIS IS BASICALLY THE SAME PRODUCT IT WAS IN 2009 AND YET THE PRICE HAS GONE UP 300 OR 400 FOLD.
BRESCH: SO LOOK, NO ONE’S MORE FRUSTRATED THAN ME. I’VE BEEN IN THIS BUSINESS FOR 25 YEARS.
I’m sure you’re very frustrated right now. What a time to have people noticing, well, this (taken from the 2015 Report):
I mean, that’s winning.
But you know, really, this isn’t Heather’s fault. It’s the system.
THIS ISN’T AN EPIPEN ISSUE. THIS ISN’T A MYLAN ISSUE. THIS IS A HEALTH CARE ISSUE. PHARMACEUTICALS, THE IRONY IS THAT THE SYSTEM INCENTIVIZES HIGHER PRICES. AND IT’S THE CONVERSATION THAT NO ONE HAS WANTED TO HAVE. EVEN YOU GUYS, THE MEDIA, AS YOU’VE BEEN COVERING THIS, THE MATH. JUST THE BASIC MATH OF SHOWING THE $608 AND WHAT MYLAN’S GETTING IN THAT SELLS. THERE’S $1.3 BILLION OUT THERE THAT IS EXCHANGING HANDS. THAT IS REAL DOLLARS. THIS ISN’T MONOPOLY MONEY. IT IS REAL DOLLARS EXCHANGING HANDS AND IT’S NOT EFFICIENT. SO CONSUMERS – I SAY WE’RE THE BEST SHOPPERS IN THE WORLD. WE WANT THE BEST PRODUCT AT THE LOWEST PRICE.
And actually, it’s the rest of the world at fault – because America is subsidising our drugs by being innovative.
THE REALITY IS WE DO SUBSIDIZE THE REST OF THE WORLD INNOVATION. WE DO SUBSIDIZE AND AS A COUNTRY WE’VE MADE A CONSCIOUS DECISION TO DO SO. AND I THINK THE WORLD’S A BETTER PLACE FOR IT. BUT THAT DOESN’T EXCUSE AN OUTDATED, INEFFICIENT SYSTEM AND WE CAN’T HIDE BEHIND THAT. CONGRESS CAN’T HIDE BEHIND IT ANYMORE BY JUST SAYING PHARMACEUTICAL COMPANIES ARE, YOU KNOW, HORRIBLE CORPORATE CITIZENS. AND THEY’RE GREEDY AND THEN THAT BE THE END OF IT. THEY NEED TO NOT JUST PUT THEIR TOE IN IT. YOU NEED TO GET IN SUBSTANTIVELY AND MEANINGFULLY AND WE NEED TO CHANGE.
I’m not sure how it’s ‘subsidising my prescription drugs’ if Mylan makes a stack of cash off an awareness program. But I guess as long as “the world’s a better place for it”.
In the wake of this story, Vox put together this great clip on America’s prescription drug commercials:
Here’s my big picture reflection on this
Healthcare is one of those markets where normal economics gets into trouble. If you let things go unregulated – like prices and advertising – you get outcomes such as massively high prices because the demand for the produce is highly inelastic, and medically-illiterate patients influencing their prescriptions because of a misleading ad that a pharmaceutical company paid for during an episode of Modern Family.
The point is: many of the more successful healthcare systems involve government regulation the entire way through the healthcare supply chain.
And I can’t find a good, or reasonable, or even an okay-ish example of a healthcare system that’s both unregulated and successful.
Just a thought.