Everything’s more expensive nowadays, making even McDonald’s meals a reason for fast food lovers to grumble. But what if the product wasn’t a Big Mac but rice, and the increase not by a few dollars, but 4 times? Just as people would struggle if rice became four times more expensive, the sky-high price of the life-saving Epipen has raised anger and controversy in the US.
The EpiPen – a device that injects epinephrine to stop extreme allergic reactions – now costs US$600 for two, from just US$100 nine years ago. This has hit parents especially hard. Apart from buying pens for each child with allergies, Epipens have to be stocked at several locations in case of an emergency (a schoolbag, the car, the house) and a new supply must be bought every year to replace the old ones that expire.
Meanwhile, telling circumstances surround EpiPen producer Mylan. After the company acquired EpiPen in 2007, the product’s price was raised on 15 occasions since 2009 (a one year period from September 2015 saw the price increase by 32%). With a patent-protected EpiPen design and no real competition, Mylan also enjoys a 94% near-monopoly in the auto-injector market.
A beehive of controversy swirls around the question of why the company steadily raised the price of its life-saving product to the point that consumers struggle to afford it. Here are some reasons CEO Heather Bresch has offered in the wake of the public outcry, along with analyses.
1.“Mylan has costs that include ‘manufacturing the product, distributing the product, enhancing the product, investing.’ “ – CNBC
Every company has costs like that, but not every company raises prices like Mylan. Unless these costs rose sharply as well, it is unclear a four fold price increase is justified. What’s more, according to the American Medical Association, the EpiPen has remained unchanged since 2009, which runs against Mylan’s claim of “hundreds of millions of dollars” spent to enhance it.
2. “The $600 list price was necessary for the company to recoup its investment in the EpiPen, which includes raising awareness for severe allergic reaction” – NY Times
Money spent raising awareness of a problem (which the product is meant to solve) isn’t a public service. It’s marketing and not a really valid reason to make a life-saving solution 4 times more expensive. Imagine a more relatable condition than allergies: cancer. Would a company with a cancer cure be justified in raising prices by 400% because it spent more money on raising awareness?
3. “That price reflects a system where there are ‘four or five hands that the product touches and companies that it goes through [intermediaries including wholesalers, retailers and pharmacy benefit managers] before it ever gets to that patient at the counter’ ” – CNBC
Having to split revenue is not the same thing as having to raise prices. A company can still make a profit (albeit smaller) while splitting revenue. Having to raise prices suggests something more serious than just high costs: a difficulty turning a profit. Quite the opposite is true: the Mylan division that sells the EpiPen has seen its profit margin quadruple since 2009.
In response to heavy criticism from the public, lawmakers, and even presidential candidate Hillary Clinton, Mylan has responded by offering coupons worth up to US$300, increasing the value of their savings card from US$100 to US$300, opening its patient-assistance program to more people and even announcing its own generic version of the EpiPen to be sold for US$300 per pair. Still, as former presidential hopeful Bernie Sanders tweeted, even the generic version is triple the price of a pair of EpiPens in 2007. With dubious reasons for its actions, prices still several times higher than before, and no promise to halt future increases, it seems Mylan deserves to remain in the ethical spotlight.
Drug companies are human organisations, capable of both great work, and blatant (and unrepentant) price gouging. Since we can’t live without the medicine they produce, if we acknowledge their right to make a profit, tempered by society’s right to make live-saving medicine more than just the preserve of the rich, then what rules should be in place to reign in those who make critical drugs prohibitively expensive? While telling an independent company that they don’t have the right to charge whatever they like for a product may not be entirely fair, neither is letting a child to die of an easily treatable allergic reaction, all for the sake of paying a slightly better quarterly dividend to your shareholders.
By Vincent Tan