Competition is the cure for EpiPen’s price hike

In 2004 a pack of two EpiPens, life-saving products used to halt severe allergic reactions, cost $100. Now, two pens list for upwards of $600 — a 450 percent price increase for the same injector to deliver the same $1 dose of epinephrine it did 12 years ago.

If you find this increase troubling, you are not alone. Earlier this week, Senator Chuck Grassley (R-Iowa) sent a letter to the CEO of Mylan Laboratories, EpiPen’s manufacturer, asking for information on its pricing strategy. Today, Senator Amy Klobuchar (D-Minn.) called Mylan’s pricing “outrageous” in a letter to the Federal Trade Commission.  

But most businesses have their prices held in check by competitors. And here Sens. Klobuchar and Grassley might be missing the forest for the trees:  Rather than focusing on the price tag, we should be asking why EpiPens face no real market competition.      

{mosads}One answer is that Mylan’s EpiPens serve their customers pretty well. In 2007, after Mylan acquired the drug, Heather Bresch (now the CEO) took the brilliant step of marketing them to parents of children with allergies. Through a combination of school partnerships and aggressive advertising, Mylan increased EpiPen use by 67% in years since. That’s good news for patients and parents, as more schools, camps and theme parks carry them on site.

It is also, of course, very good news for Mylan: EpiPen revenues went from $200 million to over $1 billion in that same period.

What’s more, most payers are insulated from EpiPen’s costs. For patients with traditional insurance plans, the product is free or low cost. Mylan itself offers a patient assistance program for 80 percent of patients, leaving them paying little or nothing to purchase it.   

Yet the situation is admittedly imperfect: Higher costs hurt patients with high deductible plans, who may find themselves buying the drug at its full list price.  It’s also a burden for patients who need to stock up on multiple EpiPens.  Costs add up.

So why no competitors? A quick look at the market would find it’s not for lack of trying:

• Auvi-Q, a “talking” autoinjector made by Sanofi, was recalled after patients reported receiving inaccurate doses of epinephrine, the drug injected through EpiPens.

• Adrenaclick is on the market now, but isn’t considered “therapeutically equivalent” to EpiPen, which would make it more easily substitutable.  (Adrenaclick was prescribed fewer than 100 times last year.)

• EpiPen competitors are in development by pharmaceutical startups like Minneapolis-based AdrenaCard and Windgap Medical in Boston.

What’s preventing competition is not lack of demand, but regulatory costs imposed by the Food and Drug Administration.  One company estimates that it would cost them at least $1.5 million dollars to develop an EpiPen alternative and push it through clinical trials.

What can be done? Imposing a price cap on epinephrine autoinjectors would only discourage future competitors. Instead, we should make it cheaper and easier to bring alternatives to market.

Congress could offer the U S Food and Drug Administration (FDA) priority review vouchers for companies that launch competitors for single-source generics.  Given the high cost of clinical trials, conditional approvals for promising medicines could also allow companies to recoup some of their upfront costs and generate revenue, while collecting final data on safety and efficacy. Another option is to list more medicines for over-the-counter use, reducing the need for expensive prescriptions.           

Instead of pointing fingers, we need to push for reforms that allow new competitors to enter the market more quickly. When barriers to entry are high, competition delayed is often competition derailed.  

Paul Howard is a senior fellow and director of Health Policy at the Manhattan Institute for Policy Research.