The Money Behind EpiPens

EpiPens and its manufacturer, Mylan, have recently been in the spotlight, as their prices have increased significantly throughout the years. Although the actual cost of manufacturing the drug may be relatively low, the retail price may not necessarily reflect that. Factors that affect EpiPen affordability include complexities in the health care system, availability of generic products, and legislations and lobbying in congress.

Between the pharmaceutical company and consumers, there are pharmacy benefit managers and insurance companies that contribute to the increase of EpiPen prices. Insurance companies offer a variety of plans with different levels of insurance coverage.

Particularly, many low-income families are attracted to high deductible plans. These plans, with low premiums, come with a cost: in emergency situations when EpiPens are necessary, the coverage does not kick in until they have spent thousands of dollars. Another consequence of these plans is that consumers continue to pay the full price on drugs, despite manufacturer rebates. Meanwhile, pharmacy benefit managers, or PBMs, contribute to rising prices by charging high service fees for their clients. Serving as an intermediate between pharmaceutical companies, insurance companies, and drugstores, PBMs also take a portion out of manufacturer rebates and retail prices. On the EpiPen’s list price of $608, $334 goes to PBMs, insurance companies, wholesalers, and retailers. The many layers and intermediaries that exist in the healthcare system each take a portion of profits out of the retail price. This means that there are large differences between manufacturing costs and consumer prices, which contribute to the cycle of increasing EpiPen prices.

The lack of direct substitutes for the EpiPen means that Mylan is essentially a monopoly in the market of epinephrine injectors. Although there are other epinephrine injection devices available, those are indirect substitutes with differences in designs and usage. Adrenaclick, which is prescribed as a generic epinephrine autoinjector, has a slightly different design. Therefore, it cannot be directly swapped for an EpiPen prescription at the pharmacy without a physician’s approval, which could increase wait time for the medicine. Patients who do end up switching to Adrenaclick would have to read the instructions and practice with it before use. The familiarity, brand recognition for EpiPens, and inconvenience can discourage users to switch to Adrenaclick, despite differences in pricing. Another option would be to use a syringe to inject epinephrine during an allergic reaction, which is much cheaper. However, it further endangers the patient because it requires the patient or bystanders, who may not be medical professionals, to quickly and accurately administer a shot. The design of the EpiPen mitigates these dangers, as it allows for rapid shot administration in an emergency situation, when it can be difficult for the patient and bystanders to remain calm. For some bystanders who may be witnessing a severe allergic reaction for the first time and trying to help, the EpiPen is much easier to handle than a syringe and vial of medication. Because of the lack of direct substitutes for the EpiPen, Mylan is able to charge higher prices as a market domineer.

The ineffectiveness of congress to regulate drug pricing also fuels the rise of EpiPen prices. Mylan and other interest groups have spent large amounts of money in lobbying lawmakers to pass legislation that benefits pharmaceutical companies. Although physicians and patients have contacted local lawmakers to get involved in controlling drug prices, these efforts have been scattered and therefore, not as effective compared to the collective efforts of pharmaceutical companies. Due to major lobbying efforts, President Obama signed the “EpiPen Law” in 2013, which required schools to keep a supply of epinephrine.  This not only provided an effective marketing opportunity for EpiPens, but also greatly increased market demand, and therefore prices, for the product. Through providing campaign funds and donations, pharmaceutical companies like Mylan had a large amount of power and influence in lobbying lawmakers to pass legislation on their side.

Thus, due to intermediaries in the health care system, low availability of generic substitutes for EpiPens, and cash-laced lobbying in congress, EpiPen prices have remained high for consumers. In efforts to increase affordability of EpiPens, patients, physicians, pharmacists, and company investors need to work together on multiple fronts to bring about change in the system.

 

Sources:

https://ndsmcobserver.com/2016/09/epipen-pricing-financially-right-morally-wrong/

https://www.annemergmed.com/article/S0196-0644(16)31329-4/fulltext?code=ymem-site

https://www.healthaffairs.org/do/10.1377/hblog20160906.056352/full/

Duhigg, Charles. Outcry Over EpiPen Prices Hasn’t Made Them Lower, New York Times. June 4, 2017.

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