The Root Cause of Mylan's "Evil"

The Root Cause of Mylan’s “Evil”

By Graham Renz on Sep 2, 2016

In 2015, an average pound of coffee cost about $4.70. Now imagine if, over the next nine years, the price of that same pound of coffee rises to over $26. Our imagined future selves would likely want an explanation for the 500% price increase.

Now just imagine that instead of coffee, the ballooning cost was for a vital medicine hundreds of thousands of people might need in an emergency situation. This is no longer a hypothetical scenario, but the current state of affairs of Mylan, a major pharmaceutical company, and its product, the EpiPen.

The EpiPen is an epinephrine auto-injector (EAI) used to treat severe allergic reactions. In 2007 it cost roughly $100, but today it costs $608. And although Mylan has invested in improvements to their product, critics don’t think the 500% price increase is justified. They think Mylan is just a case study in corporate greed.

But while it’s convenient to blame Mylan for the price surge, that doesn’t go quite deep enough. Mylan is just like any other for-profit business trying to make the highest profit it can. What’s to blame is the near monopoly (98% market share) Mylan has been granted on the EAI market.

Just this year, a potential competitor to Mylan, Teva, unexpectedly failed to receive approval from the FDA for a generic EAI. And last year, another EAI was removed from the market by the FDA for minor dosage issues. (Note: Mylan just announced it will introduce a generic EAI, although it will cost $300.) Moreover, in 2013, the School Access to Emergency Epinephrine Act, which incentivized schools to stockpile EpiPens, was signed into law.

In short, regulations have made purchasing an EAI besides the EpiPen nearly impossible. Predictably, in the absence of any competition, EpiPen prices rose.

So regardless of whether Mylan’s prices are “unfair,” the real question to ask is this: What is the framework in which private enterprises like Mylan best serve the needs of ordinary people? The answer is a free and competitive market—where barriers to entry are reasonable, regulations make sense, and preferential government treatment is non-existent. Unfortunately, the EAI market is nothing like this.

Perhaps the current EpiPen outrage will make policymakers ask themselves: Is our healthcare market open and competitive? Are our healthcare regulations reasonable and fair? Should we cautiously deregulate the pharmaceutical industry?