How Social Media Forced The Price Drop Of The EpiPen
The EpiPen is one of the most important medical devices available to people who have life-threatening allergic reactions to particular foods or bee stings. For them, carrying an EpiPen has become a way of life, because it only takes one severe allergic reaction to cause anaphylactic shock and death from asphyxiation when their airways swell shut.
The EpiPen was originally developed by Sheldon Kaplan in the mid-1970s for the US Department of Defense in order to serve as an easily administered antidote to nerve gas on the battlefield. It worked so well that the Food and Drug Administration (FDA) approved it for marketing to the general public in 1987. It delivers a precise dose of synthetic adrenaline called epinephrine to counteract anaphylaxis during an acute allergic reaction.
Mylan acquired the exclusive rights to the EpiPen in 2007, and the price almost immediately began to rise. Starting at $94 for a two-pack in 2008, Mylan hiked the price that year by 5%, following that up with another 5% increase in 2009, then ended that year with an additional hike of 19%.
From 2010 to 2013, additional 10% increases occurred on a fairly regular basis. From 2013 to 2016, the company bumped up the price by 15% every other quarter.
Mylan CEO’s Pay Rose Nearly 700% as EpiPen Price Rose More Than 500%
All those price hikes from $94 back in 2008 to the current price of $600 translates into a 538% increase (not adjusted for inflation). Heather Bresch became Mylan’s CEO in 2011, and before that, she held a variety of executive-level positions with the company.
In fact, she started her career at Mylan in 1992 in a clerical position and worked her way up to the very top. From 2007 to 2015, her total compensation went from $2,453,456 to $18,931,068, which is a 671% increase.
Needless to say, people became outraged. After all, given that the product was developed in the 1970s, the research and development costs have long since been recouped. And it’s not like Mylan has made any major improvements to the product. It remains virtually unchanged and literally contains less than a dollar’s worth of epinephrine.
Mylan has a monopoly on the epinephrine auto-injector market, and the barriers for new products to be developed and enter into the market are huge. This means it can pretty much do what it wants with the price of the EpiPen, and the consumers who depend on the product to avoid death from anaphylactic shock are now suffering the results.
Because epinephrine degrades over time, EpiPens have to be replaced every year. Also consider how many people need to have multiple sets. If you have a child who is at risk of anaphylactic shock, you can bet you’d want EpiPens in their backpack, at school, at home, and perhaps even at grandparents’ houses. As a result, Mylan rakes in $1 billion in sales each year from the EpiPen, representing 40% of the company’s operating profits.
If all of this sounds eerily familiar, you’re probably remembering Martin Shkreli. He’s the former founder of Turing Pharmaceuticals— the company that acquired a lifesaving AIDS drug and then raised the price by 5,500% overnight. The price rocketed to $750 per tablet instead of the previous price of $13.50, all in the name of turning a profit.
The drug was Daraprim, and it’s effective at fighting off parasitic infections in patients with compromised immune systems. People were shocked that a company would callously increase the price of a drug that had been around for 62 years, raising the cost of treating AIDS by hundreds of thousands of dollars. When the story broke, Democratic presidential candidate Hillary Clinton tweeted her outrage and rolled out a drug plan to address the issue. Turing’s stock price tanked, and Shkreli was ousted.
Clinton, Parker, and Social Media Explode
On Wednesday, August 25, 2016, Clinton found herself once again responding to a drug company’s price gouging tactics. She tore into Mylan as another example of a drug company putting profits before patients and called on the company to voluntarily lower the price of its EpiPens. She said Mylan’s approach to pricing is “outrageous.” Minnesota Senator Amy Klobuchar has called for an official investigation of Mylan’s price hikes through the Senate Judiciary Committee and the Federal Trade Commission (FTC).
Actress Sarah Jessica Parker, whose son has a severe peanut allergy, has been actively working to increase awareness about anaphylaxis. In fact, she was a paid spokesperson for EpiPens and Mylan until last week, when she announced on Instagram that she could no longer support Mylan. She refused to tolerate its systematic price increases, which make the life-giving devices beyond the reach of many who rely on them. She has cut all ties to the company and its product.
An online petition started by The Other 98% calls on Mylan to lower the price of EpiPens. Within its first days, it accumulated 63,000 signatures. As of 11 pm on August 31, that number had skyrocketed to 218,632.
Mylan Halves EpiPen Price After Firestorm, But Not Really
By Thursday morning, August 25, Mylan was scrambling to respond to the widespread public backlash. It announced that it would cut the cost of its EpiPens in half. This turned out to be a deceptively slick media campaign, though. In reality, it’s giving savings cards worth $300 each to select groups of uninsured and underinsured consumers. It hasn’t changed the list price of EpiPens.
It’s the same thing Shkreli did with Daraprim. He announced that the company was cutting the price in half, but it was a discount program offered to hospitals, which meant that only a small slice of consumers would benefit. Mylan is also doubling its income eligibility so more consumers will qualify for its patient assistance programs, but discounts and assistance are both ways for the company to continue charging plenty of people the fully inflated price.
For her part, Clinton is smart enough to see through these tricks, calling the company out by noting how “discounts for selected customers without lowering the overall price of EpiPens are insufficient, because the excessive price will likely be passed on through higher insurance premiums.”
Summary: A Case Study in Health System Dysfunction
Bresch has feebly attempted to address the firestorm of public backlash by claiming it’s not her company that’s at fault, it’s the healthcare system overall. She blames a system that charges patients full retail price for drugs while constantly raising health insurance premiums— that’s a system that’s broken.
She’s right, of course, except that Mylan could just slash the price of the drug. Remember, this isn’t an elective medical treatment, it’s a lifesaving medicine that millions of people rely on to keep them alive during an acute allergic reaction that could otherwise kill them.
When companies such as Mylan and Turing, as well as corporate leaders such as Bresch and Shkreli, price gouge people for lifesaving medicines, they ultimately end up reaping what they sow. Case in point: On August 19, Mylan’s stock price was $49.20 per share. Then the public backlash about the EpiPen price hikes got into full swing, and now its shares are at $42.36, representing an overall 13.9% drop.
That may not seem like much, but it’s actually a very big deal. Mylan’s market cap— the total value of all its outstanding shares of stock— has declined by more than $2 billion, falling from $24.74 billion on August 19 to $22.54 billion on August 31. Some would call that cosmic retribution.