Editorial: Feds enable inflated drug costs
The recent controversy over EpiPen pricing has many criticizing pharmaceutical companies like Mylan, which manufactures the product, for price gouging. The company raised the price for a two-pack of EpiPens by 550 percent over the past eight years. This is outrageous for the many individuals who depend on the life-saving drug for allergic reactions.
It now costs more than $600 for most customers. Meanwhile, executive pay at the company has also increased significantly.
Pharmaceutical companies often act as corporate “rent seekers,” but their actions are enabled by a broken health care system, along with government agencies, that regulate it.
Calls for even more government regulation, and for price controls on prescription drugs, will only exacerbate the problems.
Heather Bresch, CEO of Mylan, said recently in an interview, “The irony is the system incentivizes high prices.” She’s under a lot of pressure from stockholders to say that, but Mylan acted this week to provide a generic version of the EpiPen whose price tag is less onerous.
EpiPens offer a surefire emergency treatment for life-threatening allergic reactions. They’re administered to people of all ages who are deathly allergic to things like nuts, eggs and bee stings.
They’re valuable not because of the medicine they administer, but because Mylan has crafted an injection system that’s essentially foolproof. Epinephrine is standardized, and the patent for it expired a long time ago.
Still, Mylan has poured much of its energy into becoming the household name for emergency injectors, and also spent millions of dollars lobbying members of Congress to maintain a monopoly on the market.
Its lobbying efforts paid off with the bipartisan passage of the School Access to Emergency Epinephrine Act in 2013, which gives federal money to states that require schools to stock epinephrine injectors, mainly EpiPens. Convenient.
That kind of lobbying is part of a warped system that controls Americans’ access to quality health care.
Other manufacturers have tried to bring similar products to market, but the Federal Drug Administration has blocked them.
Sanofi introduced a competitive product last year. But 26 out of hundreds of thousands of successful applications malfunctioned. The FDA was involved with the product’s recall.
The FDA also rejected an application for a generic injector from manufacturer Teva, citing “major deficiencies” with the product. That government-mandated delay was likely to boost Mylan’s earnings by 20 cents a share, according to industry analysts at the time, and probably saved the company from $200 million in losses.
Additionally, in many states if a doctor writes “EpiPen” as a prescription, pharmacists aren’t allowed to replace it with a generic version, Adrenaclick, which costs one-sixth of Mylan’s product.
A prescription drug pricing system in which patients have been mostly protected from the real costs of the drugs doesn’t help. The Affordable Care Act, which has forced higher deductibles and more out-of-pocket expenses for many Americans, is likely illuminating just how dysfunctional drug pricing has become.
Everyone in the system — from pharmacists to drug distributors to yes, pharmaceutical companies — makes more money from higher-priced drugs. That’s the incentive Mylan’s CEO was referring to.
Government regulation has proven to be a driving force behind high prescription drug prices. It’s time for reform.