Column: Don’t be fooled: Mylan’s ‘bargain’ price for its generic EpiPen conceals a massive price hike
Mylan, which showered itself in infamy by jacking up the price of its EpiPen, a potentially life-saving epinephrine injector, by 500% over less than a decade, announced Friday that it is finally bringing out a promised generic version of the device for $300 per two-pack. That compares with more than $600 for the branded package.
Some news reports described this as “a more than 50% discount.” That’s incredibly misleading, which is exactly what Mylan hoped. In fact, the device will still cost three times as much as it did when Mylan acquired the rights in 2007. This for a product that delivers a dose of a generic drug that Mylan played no role in developing.
Sen. Bernie Sanders, I-Vt., who has been a dogged critic of pharmaceutical profiteering, had the right take on Mylan’s announcement. “This isn’t a discount,” he tweeted. “It’s a PR move.”
Mylan also said it would offer a $25 discount on the co-pays for buyers with health insurance, and a savings card good for a discount of up to $300 on deductible or co-pay expenses for the branded EpiPen, which still lists for more than $600. That offer is good only until Dec. 31, according to the company.
This isn’t a discount. It’s a PR move.
— Sen. Bernie Sanders, on Mylan’s announcement of a generic EpiPen
In the company’s announcement Friday its CEO, Heather Bresch, tried to portray these steps as altruistic breakthroughs. Calling its strategy “decisive,” she said, “This unprecedented action, along with the enhancements we made to our patient access programs, will help patients and provide substantial savings to payors.”
The truth is that Mylan is pedaling as fast as it can to swim out from under a tide of negative publicity resulting from ethically dubious corporate behavior that had brought Bresch—the daughter of Sen. Joe Manchin, D-W.Va.--before congressional investigative committees to explain her pricing policies.
As one sign of its noxious habits, the company agreed to pay $465 million in October to settle allegations that it systematically ripped off Medicaid by claiming its branded EpiPen was a generic medical device. That allowed it to pay a smaller rebate to Medicaid than would have been required if the EpiPen were properly classified as a branded product. And as we reported in August, the company is also a tax dodger: Mylan is a leading exploiter of the maneuver known as inversion, in which a U.S. company cuts its tax bill by acquiring a foreign firm and moving its tax domicile to the acquired company’s homeland — in 2014 it acquired an overseas generic drug company and reincorporated in the Netherlands, that firm’s home.
As in all inversions, nothing else changed: Mylan’s operational headquarters remained in Pennsylvania, and its main workforce didn’t relocate. At one point, Mylan even appealed to U.S. antitrust officials to help it block a takeover bid from an Israeli company. But the inversion deal did allow the firm to cut its U.S. tax bill.
Still, most of the bad PR arose from Mylan’s pricing of the EpiPen. The device is carried by children and others with severe allergies, for whom it can deliver a crucial shot of epinephrine to keep their airways open until emergency medical help can arrive. The device was priced at about $100 for a two-pack when the rights were acquired by Mylan. The company promptly instituted a relentless string of increases, while successfully lobbying for a law providing federal subsidies for public schools that stocked the device.
The EpiPen eventually became Mylan’s single most important product, accounting for $1 billion of its $7.7 billion in sales in 2014 and of its $9.4 billion in sales in 2015, according to corporate financial statements.
In appearances on Capitol Hill this year after EpiPen pricing became a cause celebre, Bresch tried to wear the hair shirt, claiming that the cost of business and the intricacies of America’s healthcare system left Mylan with little choice but to charge more than $600 for its two-packs. She told a House committee in September that Mylan is spending “approximately $1.2 billion on R&D and manufacturing facilities.” The statistic conflated research and development and manufacturing; in fact Mylan spent $672 million on R&D in 2015, and fully $2.2 billion on marketing and administrative overhead. Judging from its most recent quarterly report, the company is on pace this year to spend about $830 million on R&D and $2.4 billion on marketing and overhead, while its net sales may exceed $10 billion.
Bresch also asserted that rebates, fees and other expenses cut Mylan’s profit on each EpiPen to a mere $50.
Plainly none of those factors prevented Mylan from capitulating to pressure and bringing out a $300 package of generics, which it says will be available on shelves next week. The company says the product will be indistinguishable from the branded version except for the absence of “EpiPen” from the label.
As for the patient assistance programs, such discounts are typically marketing schemes dressed up as altruism, as we reported last year. They increase demand and provide public-relations benefits, while concealing the true price of a product charged to commercial insurers and public healthcare programs such as Medicare and Medicaid. By reducing consumer discontent over drug prices, they allow the drug companies to keep charging more. That’s why it’s illegal to offer such manufacturer-sponsored discounts to Medicare and Medicaid enrollees—they fall under federal anti-kickback laws.
Mylan undoubtedly will heavily promote its EpiPen initiatives as testaments to its devotion to consumer welfare, seeking plaudits for its public spirit and sympathy for its sacrifice. It doesn’t deserve them. Don’t fall for the pitch.