March 12, 2019 | Andrea Thurnheer
Edited by: Destiny Staten
Advancements in anti-histamine drug technologies have allowed people with severe bee allergies to venture outside the safety of their homes and for those with tree nut allergies to dine in public. Anyone with life-threatening allergies knows not to go anywhere without their most important accessory: an EpiPen. This handy device slides easily into a purse or pocket and, with a swift stab to the thigh, can quickly inject the lifesaving epinephrine in any case of an anaphylactic shock. Epinephrine is not a revolutionary drug development, but the practicality and simplicity of the EpiPen is what has made it a dominant device in the biotech world.
In 2007 Mylan Pharmaceuticals bought the rights to EpiPen. At the time, an EpiPen set was priced under $100. Today, a set of epinephrine easy injectors costs over $600. This translates to a baffling increase in price by more than 600%. This dramatic price change was extremely controversial. Critics questioned Mylan’s intentions behind this immense price difference that left many affected by severe allergies unable to afford the lifesaving device. Putting such a high price on epinephrine injectors backed consumers into a corner, forcing them to sacrifice other needs in order to pay for their own safety. Mylan defended themselves with various claims, including their expectation that insurance companies would be prepared to absorb much of this inflated cost. Their defense of this huge price inflation was weak and inevitably led to legal prosecution.
How Mylan was so easily able to raise these prices can be traced back to their persistent and successful lobbying techniques. To parents, the EpiPen name carries a huge meaning: the difference between life and death for their severely allergic child. Using this household name, Mylan imposed their product on schools under the cover of anaphylaxis awareness. They bettered their public image by offering discounted or free devices to schools and convinced many states to require the availability of epinephrine injectors in public places. Schools receiving the free or discounted EpiPen sets needed to first sign a contract stating: “the School hereby certifies that it will not in the next twelve months purchase any products that are the competitive products to EpiPen Auto-Injectors.” This contract ensured that competition would not be able to offer their products to schools. According to Herbert Hovenkamp, a law professor at the University of Iowa, using this tactic to require a customer to promise not to purchase from competitors hinders competition. This, along with Mylan’s already dominant grasp on the market, has the potential to violate antitrust laws. Mylan was able to hide under the premise of altruism and support for public health while obviously taking advantage of schools. Mylan used these giveaways to justify high costs, but in reality, this supposed altruism only gave them an unfair advantage.
The Antitrust Laws, established years before companies like Mylan existed, attempt to control this sort of monopolization. According to the Federal Trade Commission, Antitrust Laws were created with one goal in mind: “to protect the process of competition for the benefit of consumers making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.” One of the three main antitrust laws is the Sherman Act, which attempts to outlaw any sort of monopolization of trade. The supreme court has since concluded that only “unreasonable” restraints of trade may be prosecuted. It is extremely difficult to define and regulate “unreasonable”restraints of trade, so the fast spread monopolization of EpiPen still has not been completely constrained.
The rapid increase of EpiPen’s cost was a clear breach of the FTC guidelines. During the summer of 2017, legal actions were taken in the form of a class action suit against Mylan Pharmaceuticals. The suit filed against the pharma tycoon outlines their breech in trade policies including:
Engaging in a ‘hard switch’ and selling EpiPen only in packs of two … Securing multiple overlapping patents on minor changes to the EpiPen and engaging in ‘sham’ patent litigation to forestall generic competition; and paying excessive rebates to commercial insurance companies and agencies not reimbursing the use of competing products.
Mylan fought back on these claims, and on August 20th, 2018 some state law claims were dismissed by the order of a U.S. District Judge due to the absence of plaintiffs from these states. Many of the complaints, however, were not dismissed, and are set to be resolved in trial during July 2020.
This was not the first time Mylan has faced the law with their callously priced product. Earlier in 2007, Mylan was faced with a false claims act due to their misclassification of EpiPen as a non-branded, generic drug—allowing them to avoid paying Medicaid rebates. Because there is no equivalent on the market, and EpiPen is priced as a branded drug, the label of non-branded rose many legal concerns. The lawsuit was settled by Mylan for $465 Million in August 2017, part of which was given to a competitor, Sanofi Pharmaceuticals, who had reported their own epinephrine auto-injector as a brand name drug. Mylan was not able to completely skirt around Medicaid Rebates, but this lawsuit did not have any meaningful effect on the already high price of EpiPen.
Although Mylan has been slapped on the wrist from various legal ramifications, EpiPen is still expensive and Mylan is still the only company with rights to this specific spring-loaded injector technique. Interestingly, other countries do not have similar issues with high costs of pharmaceuticals. In the United States, per capita spending on prescription drugs runs around $850, while in 19 other developed nations the average spending was only $400. In this study led by Dr. Aaron Kesselheim, it was found that manufacturers are able to set high costs for their drugs due to patent exclusivity, thus awarding manufacturers with patents lasting more than 20 years. These types of laws make it extremely difficult for generic types of the same drug – or in EpiPen’s case, drug delivery technique—to emerge.
In addition to less patent exclusivity in other countries, nations with lower pharmaceutical spending tend to have regulations in place to control both the pricing of pharmaceuticals and their profits. In Norway, the government will cover the cost of most prescription drugs and extensive research is done to decide whether a new drug is cost efficient or not. Unlike in the U.S., state run organizations in Norway have the power to bargain with large pharmaceutical companies, which lead to competitively priced products. Since there is no bargaining power between Medicaid and large Pharmaceutical companies in the U.S., companies can set drastically high prices with few repercussions. Into EpiPen’s case, pricing seems completely unreasonable. However, until the government wishes to take control of this unfair price setting, companies like Mylan will continue to cheat consumers across the nation.
The exact laws that intend to protect intellectual property end up also allowing for pharmaceutical companies to take advantage of the exclusive rights given to them under these regulations. Protecting intellectual property is important, but these regulations end up victimizing consumers with little options and control over what they are paying for. The U.S. remains as one of the most innovative countries—partially due to the high rewards for groundbreaking products—but the value of great innovation sets the tone for a monopolization of lifesaving products.
Andrea Thurnheer is a sophomore at Johns Hopkins University majoring in Chemical and Biomolecular Engineering.
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