By Robert Pearl, MD | Forbes.com | September 1, 2016
On her first day of kindergarten, five-year-old Sally is eating her lunch and suddenly chaos breaks out. Her face swells, her breathing becomes difficult and, without anyone realizing it, her blood pressure falls. Anaphylaxis has set in.
Her mom warned her teacher about her peanut allergy, but delayed purchasing an EpiPen because of the $600 price. The teacher, as a precaution against such allergies, had asked all her students to let her know if anyone had a peanut butter sandwich. But these are five-year-olds.
By the time the paramedics arrive, Sally is dead. A photojournalist notices the police alert and rushes through the school door to take a picture of the child, now turned blue, and her grieving mother. The photo goes viral.
Let’s look into the story behind this hypothetical episode.
The EpiPen Becomes Private Property
It was impossible to look online last week without noticing one story after another about the egregious price increases for the EpiPen and, further, the ensuing demand for investigations by Congress and the Federal Trade Commission from a variety of public figures, including Minnesota Senator Amy Klobuchar, whose child has severe allergies.
Mylan, a formerly U.S.-based pharmaceutical company that relocated to the Netherlands for tax-preference purposes, offered feeble explanations for the increases and a too-little-too-late “savings card.” When the offer was exposed as blatantly self-serving, the company suddenly announced it would be selling a generic version of its product, in yet another ruse to maintain its hugely profitable control of the market. If Mylan really wanted to address the issue, it could have just lowered the price of its product. Never happened.
Anaphylaxis is a life-threatening response of the body to a range of foreign proteins, often food, latex or bee stings. The frequency of death from anaphylaxis has diminished over the past several decades as people have become more aware of the trigger proteins and recognized the need to respond to the early signs with a rapid injection of epinephrine. As a result, an estimated 80 patients die per year. The drug works by opening the constricted airway passages and elevating the blood pressure.
The mechanical device in the EpiPen to deliver epinephrine was developed in the 1970s by a NASA engineer. It was designed for the rapid self-injection of antidotes to chemical warfare agents in battle, and in 1987 it was approved by the FDA for use with epinephrine. Epinephrine itself is a human hormone, first isolated by Japanese scientists in 1901. So the drug couldn’t be patented, although the device itself, the same one created by a government employee, was. The logical assumption, of course, is that a technology developed by a NASA engineer would be owned by all Americans. But it is not.
Mylan Tries to Counter the Backlash
As has been reported extensively, Mylan has raised the price of EpiPen 2-Pak over the past decade from $100 to more than $600, all without investing a single dollar in R&D. As a result, annual sales rose five-fold, from $200 million in 2007, when Mylan acquired the rights to the EpiPen, to more than $1 billion. Meanwhile, compensation for the company’s CEO, Heather Bresch, has swollen some seven times over, from $2,453,456 to $18,931,068 last year.
Mylan has spent the past week in the hot seat. Its first attempt at defending its actions—that this price hike is not a big problem for patients because insurance companies typically pay the bills—is the kind of rationale that drug companies have commonly used when under attack for otherwise inexplicable price increases. The idea that monopolistic pricing is ethically acceptable because someone else has to pay for it lays bare a serious abdication of responsibility. Unfortunately, as we know all too well by now from other recent examples, the pharmaceutical industry as a whole continues to exhibit high levels of arrogance and disdain across the board about its role in exacerbating healthcare’s affordability crisis.
Mylan’s follow-up attempt at self-defense was to note how much lower prices are in Europe than in the U.S., and to claim a need to generate dollars for R&D. This is highly debatable, if not demonstrably untrue. First, Mylan did zero R&D on the EpiPen. Second, it doesn’t even manufacture it, just markets and sells it. And third, the real reason for the discrepancy between U.S. and Europe is that European governments negotiate over the prices that drug companies charge. This practice, common around the world, is prohibited in the United States, even when our government is ultimately paying over half of the total cost of medical care in this nation through Medicare, Medicaid and other federally funded programs.
Finally, when all other explanations failed to establish credibility, Mylan played a new card—a “savings card” worth $300. These kinds of cards are a common public relations tactic used by drug companies to distract from any conversation about the actual price of a drug. Such cards make for a good sound bite until you dig a little deeper. This particular card—which covers only half the price of the current $609 list price of a dual pack of EpiPens—is available only to commercially insured customers in very specific types of plans. Its use is illegal in programs such as Medicare, and unavailable to the uninsured. These “saving card” programs are therefore nothing but a bait-and-switch, while skyrocketing drug prices contribute to soaring premiums and other healthcare system costs. In each case, these gambits buy the drug corporations the appearance of doing good, but also sow confusion among consumers, create potential legal problems for payers and, above all, protect the company’s ability to generate outsized profits. And now, in a last-ditch ploy, Mylan touts a generic version of what it already offers, a non sequitur.
Nor is EpiPen the only product on which Mylan has jacked up prices over the same time period. It raised the price of ursodiol, a generic medication that treats gallstones, by no less than 542%. It also increased the price for metoclopramide, for treating gastroesophageal reflux, by 444%, and dicyclomine, for irritable bowel syndrome, by 400%. In no other industry is this type of price gouging possible, much less legal.
An Action Plan
We have to change the rules that allow for this kind of pricing profiteering at the expense of consumers and vulnerable patients.
To that end, I propose the following:
- Encourage Congress to pass legislation to limit the ability of drug companies to raise their prices without reasonable explanations.
- Reduce the length of patents and other grants of marketing exclusivity, taking into account the dramatically shorter times it takes drug companies with exorbitant prices to recoup their R&D investments compared to the past.
- Prosecute companies that leverage their massive resources to obstruct competitors from entering the market or introducing reasonably priced generic alternatives, including “pay-to-delay” agreements, which stifle competition through stalling tactics.
- Urge Congress to lift the ban on the government negotiating with drug companies to reduce Americans’ growing subsidizing of the rest of the world through outrageous prices that no other country pays.
Imagine how much all Americans would benefit if a product like the EpiPen were required to limit its price increases to stay in line with general inflation, at least unless and until Mylan proves that it has invested in substantially improving the product. Aren’t U.S. taxpayers entitled to a return on their investment through the billions in tax dollars that fund federal basic research?
In the hypothetical story of Sally, the photo of the dead child and grieving mother echoed throughout social media and spurred action. Elected officials passed legislation along the lines described above. The price of the EpiPen was reduced to reasonable levels, and so were the prices of a slew of other astronomically expensive drugs. As a result, no more children had to suffer or die from the outrageous pricing of this and other life-saving medications.
This article originally appeared on Dr. Pearl’s column on Forbes.com