My Facebook feed is alive with Hillary Clinton fans complaining about the price of an EpiPen and also about the high income of the CEO of the company that makes the EpiPen. Here are some samples:
It’s one thing for a new experimental drug to be expensive to pay for all the failed attempts. Makes perfect sense. But buying up long established technology that by all rights should have come off patent by now and price gouging consumers is just hideous and I don’t think you want to be defending that kind of behavior? The original epipen patent is from 1977. Patent lengthening is one of many games pharma companies play to extend their monopolies as long as possible. As for regulation preventing competitors, safety matters, otherwise any snake oil salesman could sell you a would be epipen (see e.g opioid epidemic). So making blanket claims against regulation doesn’t really help here. This is a specific example of this problem and it could be solved by the government treating it as an unfair monopoly and forcing them to break it up by e.g. licensing their remaining patents to competitors.
[after a commenter pointed out that competitors couldn’t get FDA approval for their devices] Maybe, but we still have anti-trust laws. Whether the market or government regulations prevent competition is irrelevant. At some point the greater good requires the destruction of the monopoly.
[after a question about why there isn’t competition] Various alternatives have been tried but none have passed regulatory muster. Free-market zealots like to depict this sequence of events as “government regulations killed the competition.” Consumer safety advocates might use a different spin on the same phenomenon: “government regulators prevented inferior and potentially unsafe alternatives from hurting consumers.” Who’s right? Who cares? If there is a monopoly, and if the current product is the only version deemed safe and effective, nothing prevents the government from forcing the monopoly to break apart. Two companies selling the identical product could still drive down prices, just as is the case with e.g. automobiles (is a Honda Accord really that different form a Toyota Camri?). The original patent expired long ago, but follow-on patents allow the monopoly to artificially continue. The drug itself is dirt cheap but a rapid and safe delivery mechanism is critical to efficacy.
Monopoly is defined by pricing power. In this case the company happens to be abusing the patent system. But that’s irrelevant. The evidence is not that they have a patent, the evidence is that they are price gouging, and that no reasonable competition exists or can come into existence quickly enough to prevent them from price gouging. The government is under no obligation to protect your monopoly just because you have a patent. The government can decide that you have recouped your investment and profit and are now just exploiting the patent system at the expense of consumers.
Friends who love to complain that women don’t get paid as much as men (i.e., that you could make near-infinite money by starting a company that hired only women) then began to complain about Heather Bresch, the CEO of Mylan, getting paid $19 million in one year. Yet their complaint was not that, like virtually all other American women, underpaid. Apparently, despite having successfully moved Mylan to the low-tax Netherlands via an inversion, Bresch was overpaid.
[Given her family connections to the rich and powerful, could she have made more money without working at all? Wikipedia says that she has four children so let’s assume she wanted four children and had each of those kids with a different father, thus maximizing child support profits. Assuming that she keeps $10 million after taxes each year, she needs to get $2.5 million from each father in order to match her Mylan income. If she could have had sex with four men, each earning $14.7 million per year, in Wisconsin, for example (child support is 17 percent of gross income, without limit), she could have matched her most recent Mylan compensation.]
Hillary Clinton says “I am calling on Mylan to immediately reduce the price of EpiPens.” (statement)
How can we explain this? The same folks who want The Great Father in Washington to regulate drugs are now objecting to a company being compensated for navigating the regulatory labyrinth? People who think The Great Father in Washington should give out monopolies via patents object to whatever particular monopoly enables the EpiPen to sell at a high price? So an official such as Hillary Clinton should decide which patents should have economic value and which should not?
Readers: Why is it that Mylan can charge a high price for these EpiPens? Why aren’t there profits sufficient to attract competitors competent to romance the FDA bureaucrats into approving a substitute?
Lions don’t lose sleep over the opinions of sheep.
How much did Bresch and her company donate to the Clinton Foundation? Since they made a profit and gave it to an efficient and effective non-profit, no harm was done, right?
I don’t believe I’ve heard anyone wonder whether EpiPen was originally mispriced. The previous owner set pricing expectations low for a monopoly on something that people can’t live without.
Drubs are still created that save lives, and cost the current price of EpiPen, and they’re welcomed and not regarded as extortionately high. What’s the complaint, that patents last too long?
Apparently the Epipen costs about $6 to make. That’s about dollar’s worth of epinephrine and a $5 delivery system. The delivery system, reportedly, was developed with the assistance of a government grant many years ago, by another company (Merck?). Mylan bought it and incurred no development expense or risk.
Mylan is a pure price gouger.
Raleigh: presumably other companies would also like to sell stuff at a high price but competition prevents them from doing so. Hence my original question of how exactly Mylan is able to do this.
> Hillary Clinton says “I am calling on Mylan to immediately reduce the price of EpiPens.” (statement)
>
> How can we explain this?
Hilary has a personal stake in this issue with Doc Choc following her around with an epipen in case she has a seizure. She’s simply concerned about having to,pay more herself.
I found this article on the alternative Adrenaclick interesting.
http://www.consumerreports.org/drugs/how-to-get-cheaper-epipen-alternative/
They don’t consider the cheaper device equivalent. So, if you get a prescription for the EpiPen, you can’t substitute. There is a bit of a point here, as the usage of the devices is different.
Here are a few of the problems…even though the Epi Pen patent is expired, the FDA does not have an accelerated process for generic medical devices like it does for drugs. So, if you made an identical thing, it would take a ton of money to get FDA approval. Others have tried and failed, and I am not sure the EpiPen itself would make it through the current process as it has a high usage failure rate in practice and it is meant to be used by people who are not medical personnel. (failures are typically from people not holding it in long enough) A trained nurse at a school should just have epinephrine and a syringe. $10, problem solved.
Finally, I would say the move toward high deductible plans is making all of this newsworthy. Previously, it would have just been a copay for many people. Now, we are more broadly exposed to insanity of the FDA and the various mounds of legislation and bureaucracy that have led us to have the world’s most expensive health care. USA #1.
That company is running at something like 9% margin overall (return on invested capital or whatever). That their generic epipen competitors failed to make the FDA-backlog gauntlet as of yet represents a subsidy that only begins to cover their expenses in getting their other lifesaving and cost-lowering generics to market.
Focusing on the poor afflicted with a particular condition as if they should be paying full retail in an age of Obamacare/Medicaid/Medicare is disingenuous. If you want costs to come down, reduce FDA oversight of generics or nationalize manufacture of generics (and I strongly prefer the first).
If insurers won’t pay 100% for epipens they’re fools. They’ll pay far more if they have to go to the hospital in an ambulance.
I’m a little bit puzzled by the patent issue with respect to the Epipen device. I was in the National Guard from 1969 to 1977. At the beginning of that tenure, the nerve gas antidote that soldiers were taught to use consisted of what was essentially a small toothpaste tube filled with a few grams of Atropine, with a needle about two inches long instead of a cap. To use it, we were instructed to jab the needle deep into the thigh muscle through whatever clothes we were wearing, then to squeeze the atropine-filled tube until all the antidote was injected into the thigh muscle (sounds gruesome — and it is — but consider that nerve-gas poisoning gives you just a couple minutes to live after you become aware of the symptoms, so there’s a strong motivation to do the jab-and-squeeze thing). By the time I got out of the Guard eight years later, the toothpaste-tube-needle injector had been replaced with an auto-injector that automatically injected the antidote when you slammed the business end of the injector against the thigh muscle. So that was sometime in the early-to-mid 70s that the new Army injector was adopted. Assuming it operates similarly to the Epipen — and maybe it doesn’t — it would seem to raise the question of why Mylan has a patent on the technology at all. Maybe both the Army injector and the Epipen patent resulted from the same body of R&D and the military (as with many other things) isn’t deterred by the high cost of the injector, or maybe the military gets a big discount. Anyway, the mid-1970s is about forty years ago so one would think that is way beyond whatever time period any company would be able to keep a patent alive. Just speculation on my part, so I could be completely wrong about most of this. But I thought the information about the military Atropine auto-injector might be interesting for your readers who haven’t received military training on surviving Nuclear, Biological, Chemical (NBC) attacks.
Any Wisconsin natives care to speculate on the challenge of finding four different men there, each earning $15M/yr, to hook up with?
There is a competitor:
http://www.consumerreports.org/drugs/can-you-get-a-cheaper-epipen/
“But EpiPen isn’t the only epinephrine injector on the market; the authorized generic of Adrenaclick (epinephrine auto-injector), is a cheaper option—we found it for $142 at Walmart and Sam’s Club using a coupon from GoodRx. While generic Adrenaclick isn’t the same technology and is used differently than EpiPen, both auto-injectors contain the same drug, epinephrine, available in the same dosages, says Barbara Young, Pharm.D., of the American Society of Health-System Pharmacists.”
But competition doesn’t matter much when you have far superior marketing and lobbying efforts:
http://www.bloomberg.com/news/articles/2015-09-23/how-marketing-turned-the-epipen-into-a-billion-dollar-business
“Then Heather Bresch, now Mylan’s chief executive officer, hit on the idea of using old-fashioned marketing in part to boost sales among concerned parents of children with allergies. That started EpiPen, which delivers about $1 worth of the hormone epinephrine, on a run that’s resulted in its becoming a $1 billion-a-year product that clobbers its rivals and provides about 40 percent of Mylan’s operating profits, says researcher ABR|Healthco. EpiPen margins were 55 percent in 2014, up from 9 percent in 2008, ABR|Healthco estimates.
How Mylan pulled that off is a textbook case in savvy branding combined with a massive public awareness campaign on the dangers of child allergies. Along the way, EpiPen’s wholesale price rose roughly 400 percent from about $57 each when Mylan acquired the product. “They have done a tremendous job of taking an asset that nobody thought you could do much with and making it a blockbuster product,” says Jason Gerberry, a Leerink Partners analyst.”
“The price increases are among the biggest of any top-selling brand drug, according to DRX, a unit of Connecture that tracks drug pricing. After insurance company discounts, a package of two EpiPens costs about $415, DRX says. By comparison, in France, where Meda sells the drug, two EpiPens cost about $85.” (Sept 2015).
“So, if you made an identical thing, it would take a ton of money to get FDA approval. Others have tried and failed, and I am not sure the EpiPen itself would make it through the current process as it has a high usage failure rate in practice and it is meant to be used by people who are not medical personnel.”
I’ve heard the same said of common drugs. Assuming that FDA approval will only get harder, it seems like there should be a considerable premium to being able to ‘navigate the labyrinth’ now and avoiding the more difficult labyrinth later. Especially for medical devices.
If Adrenaclick is on the market, it seems straightforward that wanting cheap EpiPens is basically whining. You want the Mercedes of epinephrine delivery, pay for a Mercedes.
And since alimony is never off topic, here is something that struck me: If Amber Heard can donate her alimony take to charity, it seems rather evident that she doesn’t need it. So why should Johnny Depp have to pay up?
By the way, here is a spirited discussion (read the comments) of the Heard-Depp divorce, including some tax aspects that may be unobvious to those outside the Hollywood zone.
http://www.thesuperficial.com/amber-heard-johnny-depp-charity-donation-7-million-14-fighting-08-2016
J: As explained in http://www.realworlddivorce.com/Relocation , under the Uniform Child Custody Jurisdiction And Enforcement Act an important factor is “the nonresident engaged in sexual intercourse in the state and ‘the child may have been conceived by that act of intercourse'”. So Heather Bresch wouldn’t have needed to find four Wisconsin natives earning $15 million/year. She would have needed to use her Senator father’s connections to find men earning that amount and bring them to Wisconsin for long enough to have sex. It could also have worked in http://www.realworlddivorce.com/Massachusetts but she would have been at risk of judge-to-judge variation as the defendants’ incomes would be above the guidelines (see http://www.realworlddivorce.com/MiddlesexMay2011 for how profitability can vary depending on the judge).
Tom: Amber Heard settled her lawsuit privately. Therefore there is no way to know the total amount that her defendant might be paying her. As noted previously, if the litigation goal had been to obtain $7 million for charity it would have made more sense to stay married for a few additional minutes, spending those minutes writing $7 million in checks from the joint account. After that she could have been divorced without hiring a lawyer since California is a no-fault state with a strong self-service orientation. If you want to get your spouse to donate money to a charity it is unclear why the obvious first move is a divorce, property division, and alimony lawsuit (enhanced with a standard-for-the-U.S. domestic violence allegation (see http://www.realworlddivorce.com/DomesticViolence )).
>As noted previously, if the litigation goal had been to obtain $7 million for
>charity it would have made more sense to stay married for a few additional
>minutes, spending those minutes writing $7 million in checks from the joint
>account.
This begs the question of whether the money was sitting in a joint account.
“So an official such as Hillary Clinton should decide which patents should have economic value and which should not?”
Erm… pretty much what the guy whom you cited wants, he said it himself:
“The government is under no obligation to protect your monopoly just because you have a patent. The government can decide that you have recouped your investment and profit and are now just exploiting the patent system at the expense of consumers.”
Very few people see a problem with this (and most who do see a problem are into econ.) Few are interested in “a government of laws and not of men”, especially the part where sometimes the outcome is not what they think is good and their favorite people in the government are actually powerless to change it.
Is this unfortunate? Yes, in the sense that it subjects us to arbitrary decisions by government, but maybe “no” in the sense that the inevitable ambiguity of laws leaves so much discretion to judges that it always ends up being a government of men.
I guess that doctor, pharmacist, and patient would all go to prison for supplying/possessing a kit with a vial of epinephrine, a syringe, and a hypodermic needle. In the bizzaro world of American health caresploitation (TM), what could be more sinister than a $3 solution to a life threatening condition.
Under the current U.S. health regime, the aspirational price for curing any life threatening condition is the value of that life less one penny.
Why do people assume a for profit company would do anything else? Remember these companies work in a capitalist system, not some hippy community were everything is free! Profit must be made, employees must get paid. The profit margin of Mylan is not very high and they make life saving drugs! In a capitalist world if the consumer cannot afford the medicine then too bad, they are not productive enough.
Lets take a quote from a great business book The Wealth Of Nations by Adam Smith
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”
Lets modify this statement that should explain the behavior of Mylan: “Is is not from the benevolence of the bio-medical company that we expect our medical drugs, but from their regard to their own interest.” Mylan is just looking out for their own interest, as we should expect in a capitalistic system.
Jonathan the profit margin is BS. Hire a few more sales people, give them giant bonuses, give yourself a giant bonus, spend a ton on advertising and suddenly it all looks so reasonable. And I am not even including time honored traditions of buying useless crap from your cousins or in laws or fraternity brothers. Or at least making them the middle men in large transactions.
I saw a report that said the CEO of Mylan makes $19M per year. Can’t vouch for the accuracy of that.
Under Pavel’s theory, emergency medical responders and rescue teams should rightfully charge average folks tens of thousands of dollars for life-saving; if the CEO of Mylan were trapped in a burning car, the rescue fee should be more on the order of $50M. Or, to be fair, just charge everybody $50M and let the little guy declare Ch. 7 bankruptcy and avoid all but $500 of that charge.
There’s very little free market dynamic at work in the U.S. health care system.
I don’t care if Hillary is upset or not.
What’s disturbing is that this thing costs this much, and all the while it’s far cheaper in other countries.
Life saving drugs like the EpiPens and asthma inhalers should be readily available to anyone who needs them at a nominal cost.
All this other talk is just smoke to deflect the fact that the drug & insurance companies are raping the public in the USA.
Hillary has nothing to do with it.