Mylan’s myopia: an “epiphany” of greed and apathy.

What Mylan NV has done over the last decade, is nothing new. In fact, it is closer to the norm, rather than an exception this century (if not earlier), to the profit-at-any-cost business model the pharmaceutical industry follows (mostly in the US, since they think they can get away with it).  Here’s my take on the EpiPen outrage that’s playing out.

First, a brief history of the drug: Naturally produced by our adrenal glands, adrenaline is a hormone that helps us survive. It gives us that rush when we sense danger--or that blush when we are in love! Epinephrine,  the American name for adrenaline,  is an iron-complex that was isolated in 1901, and subsequently manufactured by well-known pharmaceutical companies as Parke-Davis, Hoechst, and others, for the treatment of asthma, anaphylaxis, and for a host of other symptoms.  The 1901 patent (yes, the US patent office actually did issue patents on naturally occurring hormones!—do you see the roots of this problem now?) has long since run out, and it is now a generic drug available wholesale for about 10 cents per dose in developing nations, and about 90 cents in the West. Due to its life saving ability in many common, everyday situations, the drug is on WHO’s List of Essential Medicines. In fact, so widely and cheaply available epinephrine is that its most expensive aspect is a ~ $10 spring-loaded, 1980-vintage auto-injector that the dosage is sold in. It is used to inject a precise dose of the medicine into the outer thigh of the patient. As such, the drug’s delivery plays an important role, as too-high a dose can cause blood-pressure to spike, and sometimes in an emergency, the patient must self-use the auto-injector quickly and easily, without any confusion or delay.  Epinephrine is sold by Mylan Pharmaceuticals under the trademark EpiPen (essentially a portmanteau of Epinephrine and Pen), which is a measured dose inside euphemistically a ‘pen’ (the auto-injector) which can be carried easily in a purse of backpack. 

Competition for EpiPen has been declining, and the way it is marketed and sold, you may say that there is virtually no competition. One may ask, how can a commodity 100-year-old drug, delivered via a commodity injector technology that’s 25+ years old, have so little—or no—competition?  In reality, besides Mylan’s EpiPen,  FDA has approved Sanofi’s Auvi-q,  Amedra Pharmaceuticals Adrenaclick, and a few other generics as treatments for anaphylaxis. Currently, there are 3 brands of auto-injectors on the market which look and operate somewhat differently. As such, the FDA has not tried to compare the 3 delivery methods for therapeutic equivalence.  While all auto-injectors have the same dosage of epinephrine, due to their somewhat different appearance, administration technique and dose verification, if your doctor writes “EpiPen” on the prescription, then the pharmacy cannot substitute without breaking the law --even if it says OK to substitute on the prescription itself! So, in effect, the doctor becomes the EpiPen salesman, and since most people trust their doctor, not many bother to question him about this. So, you may ask, why would my doctor steer me to EpiPen? For one, EpiPen was the first to market in the 1980s (long before Mylan bought the rights), and for over 25 years, enjoyed virtual monopoly status and brand recognition, while charging a nominal price to make a healthy profit. Since the price wasn’t very high ($50 per EpiPen until 2007), and the demand wasn’t rising, there really was not much effort by other manufacturers to get in—until Mylan bought the rights to EpiPen in 2007, and started aggressively to drive this from $200 million to over a $1 billion in sales, with sky-high profit margins! As luck would have it, Sanofi had a product recall of their Auvi-q in 2015. The recall was reportedly due to ‘potentially inaccurate dosage delivery’ based upon some reports of ‘device malfunction’. These ‘reports’ were never confirmed (sounds fishy, if you ask me).  The FDA, the once vaunted guardian of American drug safety that kept out Thalidomide, started dragging its feet on letting Sanofi’s Auvi-q back in after the batch of drugs in question were removed from the market. Further limiting competition, when the biggest generic drug company in the world, TEVA, wished to enter the American market with its own brand earlier this year, the FDA our gate-keeper  refused.  In the end, Adam Smith’s ‘invisible hand’ that is supposed to regulate supply of a product in the market based on profit, simply did not work!  

    

Demand for the drug has been rising, especially since the 2012 death of a Virginia first-grader after eating a nut. This tragedy could have been avoided if epinephrine was available in the school nurse’s office.  The fear this generated with parents of school-age children, sparked a nationwide wave of legislation allowing public schools (funded by tax-money) to stock the drug.  This in itself was an unusual move for a prescription medicine written for an individual, as  this would now require schools to store and dispense it just as though the school nurse was a doctor and pharmacy all rolled into one. But, once the law was passed and the school personnel were given legal protection for dispensing EpiPen, it became harder for another supplier to come and offer an alternative. So, with this ‘barrier to entry’ established, EpiPen’s monopoly status was reinforced with the roughly 8% under 18 school children –or about 6 million!--that suffer from food allergies. Taking advantage of this confluence of factors, Mylan launched in August 2012 a marketing campaign called EpiPen4Schools which offered the 2-pack EpiPen at about quarter the price they charge to pharmacies nationwide.  However, to qualify for this, the school had to agree to not purchase any competitive product, a clear violation of antitrust law. 

In fairness to Mylan, the drug maker at the center of the controversy, while the price has increased at about 10-20% every few months since 2009 (Source: Elsevier Clinical Solutions’ Gold Standard Drug Database), the current $600 price-tag for a twin EpiPen pack, has been that since 2015. None of the parents seemed to mind paying it back then, or so it would seem.  All of a sudden, with the 2016 school year round the corner, parents woke up. So what changed?  Health insurance plans are now pushing more onto the patient, with higher co-pays and higher deductibles. As such, the sky-high price is starting to hit the consumer where it hurts the most—in their wallet! The complicated system of 3^rd party payments in America’s healthcare industry, has to  a large extent, shielded the average consumer from the sordid picture behind the scenes where everyone (usually private parties such as doctors, hospital chains, pharmacies, pharmacy benefit managers, drug companies, diagnostic companies, medical equipment manufacturers, medical supply companies, etc. etc.) has a vested interest in maximizing billing/profit, while minimizing transparency, doing everything to distort the law of supply and demand—and even changing the law if they have to by using powerful industry lobbying groups, or funding election campaigns! The customer is usually in the dark about the ‘what, why and how’ aspects of the health products they consume. And, nobody wishes to explain that there may be an Option B or C where the same epinephrine may be bought for $150. But then, if you, the customer, are not paying for it and don’t care, why would anyone else?

   

Of late, the veil of secrecy shrouding drug pricing is starting to lift, driven by technology! With the rise of social media comes an amazing ability for individuals to band together, to shine a light on this darkness.  From the price gouging of Turing to Valeant to Mylan (it is no accident that these exposes are starting to happen more and more frequently!), armed with Facebook and Twitter—and an election year to boot--consumer activism is taking on a whole new dimension—people are able to team-up and beam-in, and spread the word around.  Unfortunately, in the case of Mylan when they got caught, instead of doing the right thing, which is to simply apologize and roll back prices, the CEO has not only given herself a 640% pay-raise, but has decided to shamelessly try and blow smoke with diversionary tactics, by expressing her “profound sadness” at the situation (of her own creation!) and coming out with coupons and a ‘generic EpiPen’ for half price! This whole saga just goes to show how far and how fast the much vaunted pharmaceutical industry, with their goal to invest in and invent life-saving drugs, have fallen in their quest for profits at the expense of our health and wellbeing.  Mylan’s behavior, whether it be the double-digit price increases since 2009, or the recent tax “inversion”, appears to be the new (or maybe not so new?) normal in the Western pharmaceutical space.  But let the word go out, with the new found (and growing) power of social media, consumers are now able and willing to fight back--even if our government won’t!

In conclusion, what is this all about? It is about:

• A pharmaceutical company, run by a powerful and greedy (aren’t they mostly?) CEO with high-level government connections, with Machiavellian marketing skills, not only creating an outrageously priced commodity product, but also blocking out competition, and creating  demand by playing on people’s fears.
• Government, more specifically an FDA whose regulatory reach once provided the guide-rails for growth, research and safety, has morphed into a Frankenstein monster that is now more a hindrance than help.  Additionally, a dead-locked law making body, the US Congress, has failed to break the logjam of disincentives that business in general, not just pharma companies, face in doing business at home.   
• A health insurance marketplace with too many layers and players, with agreements and exclusions, with all kinds of copays and deductibles, so convoluted and shrouded in mystery, that an informed judgement by the average Joe is not only not possible but quite possibly best avoided for the sake of sanity.
• Consumer apathy, with an entitlement mindset that refuses to accept responsibility for their own health, that believes ‘more is better’ as long as somebody else is paying for it, layering on top of a hypocritical reasoning on how healthcare is managed and apportioned as long as they don’t have to cut back, often sacrificing any rationale or logic at the alter of politics—all the while believing that this is the best that there is. For how long can ignorance be bliss?

And finally, what is this not about? Sadly, it is not about our children.