In the latest in a recent series of controversies over prescription drug prices, Mylan Pharmaceuticals has come under well-deserved fire for jacking up the price of a package of EpiPens — devices that deliver an emergency shot of epinephrine to someone suffering a potentially fatal allergic reaction — 550% since acquiring the right to sell the devices in 2007, from $94 to $608. That may seem modest in comparison to the more than 5,000% increase that Turing Pharmaceuticals quickly imposed on Daraprim, an anti-malarial drug also used by HIV patients, or the more than 3,000% increase that Valeant has extracted for Syprine, a blood-cleaning agent. But given the life-saving nature of EpiPens, their widespread use and Mylan’s effective monopoly, the company’s profiteering is outrageous.
After lawmakers and consumer groups howled in protest, Mylan announced that it will increase the discounts offered to low- and moderate-income buyers — a move that will nevertheless leave the price three times as high as it was in 2007, and provide no relief to the taxpayers who foot the bill for government-purchased EpiPens. The company offered no defense for its decision to raise prices repeatedly despite making no improvements to the product. Instead, it had the hubris to blame Obamacare and insurance companies for the proliferation of policies with higher deductibles, which force many consumers to cover the full cost of the devices. In other words, imposing giant and unneeded drug price hikes was perfectly fine until consumers noticed.
(Drug makers and their allies have also taken to blaming pharmacies and prescription drug benefit managers such as Express Scripts for not passing along the discounts they negotiate with manufacturers. But the middlemen aren’t the instigators of huge price hikes — the drug companies are.)
Consumers can hardly rely on public outrage to keep prices in check. Instead, they need more competition from generic drug makers, especially on medicines that could spell the difference between life and death. Like Daraprim and Syprine, epinephrine is available in a generic form. At present, however, there’s no generic version of the EpiPen injector for sale in the U.S.
Part of the answer is to make it harder for the Mylans of the world to keep rivals out of their market. The company twice struck deals with would-be competitors to delay them from seeking approval for generic versions of the EpiPen, and later petitioned the FDA to hold off an EpiPen alternative on the grounds that it didn’t use the same safety mechanisms, and so could be confusing to users in an emergency situation.
Another part is to reduce the time and money required to bring a generic version of a drug or device to market, albeit without compromising safety. The Food and Drug Administration gives priority to applicants proposing the first generic version of a drug, but not later ones. The agency should be looking for ways to draw generic competitors into markets with runaway prices; as it is, the FDA pays no attention to how much drugs cost.
Meanwhile, consolidation among drug manufacturers is reducing the number of potential competitors, as well as the incentive to compete. That raises a harder question for policymakers: If market forces can’t produce vigorous competition, what can government do to restrain price hikes without distorting the market and reducing drug supplies?
Among other steps, Democratic presidential candidate Hillary Clinton has proposed capping insured consumers' monthly out-of-pocket costs for prescriptions, as California has done. The potential drawback there is higher premiums, although if done right, such an approach simply allows consumers to spread out over 12 months a bill they would otherwise have to pay all at once.
Both Clinton and Republican nominee Donald Trump also want to let consumers buy prescription drugs from sellers in other countries, where prices often are considerably lower than they are in the United States. For example, a single EpiPen costs about $100 in Canada, a third of the U.S. price. But inviting online sellers to supply controlled substances across the border is fraught with risk to safety and drug supplies, as the candidates acknowledge. One promising alternative would be to make it easier for foreign drug makers to sell here the products they’ve won approval for in other countries.
Healthcare reformers are pushing insurers and government health programs to tie payments for drugs based on the value they provide to a patient and the healthcare system as a whole. That shift could generate competition between different drugs, rather than just different manufacturers of the same compound. Granted, it’s a tricky exercise. Through Medicare and Medicaid, however, federal and state governments have started to explore how to do so with several types of treatment, including physician-administered prescription drugs. Those efforts could prove crucial in the struggle to slow the growth in healthcare costs.
Some critics of the pharmaceutical industry have called for more dramatic — and potentially more disruptive — steps, including government price controls and taxes on windfall profits. Before lawmakers even consider going that far, however, they should do more to bring market forces to bear on drug monopolists. Huge price increases should be sending an irresistible invitation to entrepreneurial companies to come in with a competing product. Especially when it comes to generic drugs, the door should be wide open.