Martin Dyckman: EpiPen debacle demonstrates need for price controls

epipen (Large)

martin dyckman“Your money or your life,” a laugh line for the great comedian Jack Benny, must be the business model of the American pharmaceutical industry.

It’s time for a serious national discussion on establishing price controls over Big Pharma.

The latest provocation is the staggering increase in the price of the EpiPen, a necessity for people with life-threatening food and bee-sting allergies. The two-dose pack that cost about $100 in 2007 is priced at around $600 now.

A different company sells the same product in France for about $85.

The self-injecting device was originally developed for the U.S. military. The drug it contains, epinephrine, actually costs about $1 per dose to manufacture, according to Bloomberg Businessweek.

All this is why Heather Bresch, the CEO of patent holder Mylan Pharmaceuticals and the genius behind the price rise, has for the moment displaced the smirking Martin Shkreli as the public face of her ruthless industry.

It doesn’t help that image that her compensation swelled nearly eightfold, from some $2.5 million to nearly $19 million, while the EpiPen was becoming six times more expensive.

Or that the face of the customer who’s being told “your money or your life” is most often a schoolchild.

Even if there’s family insurance, most plans these days have enormous deductibles

And yes, Mylan is another of those companies that ran out on U.S. residency — in this case to the Netherlands — to reduce its taxes.

Unlike Shkreli, a corporate takeover rogue who skyjacked the price of a vital anti-parasitic drug for people with compromised immune systems, Bresch is a major figure in the pharmaceutical industry. In that respect, her profiteering is more significant, and more worrisome, than his.

Responding to a social media firestorm that yielded some 70,000 online signatures, 100,000 letters to Congress, and serious attention in the media, Bresch announced Mylan will give some customers larger vouchers to buy EpiPens at discounted prices.

But those apparently aren’t available to people on Medicare, soldiers and veterans, and millions of others who have no insurance. That’s no substitute for reducing the base price to something reasonable.

Reeling under public pressure, Mylan announced Monday that it will offer a generic version for about $300. That’s still three times what it cost in 2007, more than three times the price of an equivalent product in France, and 300 times the intrinsic value of the medicine the device contains.

Unless you’re one of those legendary folks who never get sick until they need the undertaker, you have had your own experiences with drug price sticker shocks. And if you’re on Medicare, it takes only a few of those to reach the coverage gap.

That Medicare or private insurance may cushion those sticker shocks is no excuse for them. Remember who’s paying for Medicare and for the insurance premiums.

In most cases, these outrageously priced drugs are sole-source products. Even when there are generic alternatives, Big Pharma has been ingenious about hyping those costs too.

Although there are many players in the industry, their individual control of specific drugs means that are, essentially, monopolies.

There are rivals to the EpiPen, but Mylan still controls about 85 percent of that market, according to Bloomberg. That’s a monopoly by any definition.

One factor is Mylan’s highly successful campaign to persuade schools to stock the device, with the encouragement of Congress and the Food and Drug Administration.

The so-called “discipline of the market” is an oxymoron in a monopoly market.

That’s why price controls would not only be appropriate, but also necessary.

Price control is a powerful weapon that should be used rarely, not least because it can backfire badly. Venezuela knows that now.

But there’s ample precedent in the United States for price controls in a monopolized industry that, like pharmaceuticals, is essential to life and health.

I’m speaking of the public utilities — electricity, gas, and often water, in which effective competition would be wildly inefficient and costly.

The standard model for regulating utilities is to establish a reasonable rate of return on investment and operating expenses, and calculate allowable profit on that.

In Big Pharma’s case, companies should be entitled to credit for what they spend to develop and test new drugs. They might even spend more on the antibiotic research they presently shun as unprofitable. This is a grave issue because of the rapid evolution of antibiotic-resistant pathogens.

I didn’t mention advertising.

Ours is not only the country with the highest drug prices, but also the only one where manufacturers can spend millions advertising drugs you didn’t know you needed and for which the disclaimers — how they might sicken or even kill you — command more time and space than the alleged benefits.

Given how Big Pharma usually leads the pack in campaign spending and lobbying expenses, the prospects for price controls must be rated slight at best.

But I’d like to hear what Hillary Clinton has to say on this. She’s gotten nearly $1 million in Pharma money this election cycle. That’s more than anyone else.

It would be interesting also to hear from Sen. Joe Manchin, D-W.Va. Bresch is his daughter.


Martin Dyckman is a retired associate editor of the newspaper now known as the Tampa Bay Times. He lives in suburban Asheville, North Carolina.

Martin Dyckman


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