Mylan CEO Heather Bresch struggled during an interview on CNBC Thursday to explain why the list price for a two-pack of the lifesaving EpiPen devices has increased by 400 percent, to over $600, in just a few years.
Bresch argued that the drug delivery system in this country is broken because it incentivizes higher prices for brand drugs. Although she didn’t admit this, the New York Times reports “a common tactic in the drug industry: sharply raising prices in the years just before a generic competitor reaches the market, as a sort of final attempt to milk big profits from the band-name drug.”
If that’s the case here, Mylan’s not the first or the last to do so. Last year, Valeant Pharmaceuticals bought Salix Pharmaceuticals and then raised the price of its diabetes drug Glumetza by 800 percent. Company officials explained their actions were consistent with what most companies do.
But these tactics are now hitting home with consumers who find themselves paying out an increasing part of their income for medicine. Rising premiums drive people to choose plans with higher deductibles, which means they are more likely to see the full cost of their pills.
“The patient is paying twice,” Bresch told CNBC. “They’re paying full retail price at the counter, and they’re paying higher premiums on their insurance. It was never intended that a consumer, that the patients, would be paying list price. Never. The system wasn’t built for that.”
But the average consumer doesn’t understand or much care how the system was built. They just know that the EpiPens they send with their children to school cost a few dollars to make, while they see price hikes of 15 percent every time they buy a new packet.
One reason Mylan is able to raise prices so dramatically is because they have no competition. “Competitors have been trying for years to challenge Mylan’s EpiPen franchise with low-cost alternatives—only to become entangled in the Food and Drug Administrations’ regulatory afflatus,” reported the Wall Street Journal.
Dr. Scott Gottlieb, who worked previously at the FDA, said on MetroNews Talkline Thursday that typically when four choices are in the marketplace, the price of a product will be reduced by half.
It’s unfortunate Mylan is getting a black-eye from this. The company, founded by Mike Puskar and Don Panoz in 1961 in West Virginia, has been a remarkable success story. Mike, who died in 2011, and his former wife, Betty, have been extremely generous benefactors to the community and the Mylan plant in Morgantown has stable, good paying jobs.
But this is a different time and the EpiPen story has touched a nerve, especially in West Virginia because Bresch is the daughter of U.S. Senator Joe Manchin, and folks still remember the scandal from a few years back over her MBA from WVU in addition to the company’s controversial tax inversion last year.
Perhaps this will open up a larger debate about drug prices, as Bresch suggested, but in the meantime she is on her heals trying to explain why Mylan is not gouging customers on the EpiPen.