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EpiPen Price Gouging: Scandal Or Just Business?

VO: Rebecca Brayton
The soaring cost of pharmaceutical drugs in the US has sparked outcry across the country in 2016, and it's no different for users of the Epipen. For sufferers of anaphylactic reactions, this medical tool can make the difference between life and death, but the increasing price is drawing alot of criticism. Welcome to WatchMojo News, the weekly series from where we break down news stories that might be on your radar. In this instalment, we’re counting down 5 crucial facts you should know about the rising cost of the EpiPen.

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Script written by Sean Harris

WM News: Epipen Price Gouging

The soaring cost of drugs has sparked a public outcry all across the US in 2016. Welcome to WatchMojo News, the weekly series from where we break down news stories that might be on your radar. In this instalment, we’re counting down 5 crucial facts you should know about the rising cost of the EpiPen.

#5: What Is an EpiPen?
The Epinephrine

An epinephrine autoinjector, more commonly known by its commercial name EpiPen, is a crucial bit of a medical kit for anyone at risk of suffering severe allergic or possibly fatal anaphylactic reactions. The device delivers a measured dose of epinephrine or adrenaline into the user’s system using a spring-loaded needle, giving quick and crucial treatment to what can be a life-threatening condition. The design was initially developed for the US military, with former NASA employee and biomechanical engineer Sheldon Kaplan widely credited as its inventor. Today, the technology has been adapted for general use, and many severe allergy sufferers carry it on their person in case of emergency. According to pharmaceutical company Mylan, marketers and distributors of the EpiPen, “as many as 8 million Americans, or 2.5% of the US population, have food allergies” – statistics that have been steadily rising in recent years. While not every allergy is severe enough to warrant an EpiPen, there is a huge need for the device, and a massive market.

#4: What Happened to the Price of Drugs?
The Price Hike

Marketing rights for the EpiPen were acquired by US-Dutch pharmaceutical company Mylan in 2007 – with annual sales around $200 million at the time. But, as of August 2016, yearly figures had surpassed $1.3 billion. The rise has been attributed to a change in marketing tactics, and a dramatic increase in the cost of the product. Beginning in 2009, a series of price hikes has seen the retail value of a pack of two EpiPens rise more than 400%, from around $100 to around $600. As a result, Mylan and EpiPen have come to symbolise the rising price of drugs in America generally. A combination of increased insurance premiums and hiked over-the-counter costs means that the patient is forced to pay more on two fronts. As EpiPen has so many patients depending on it however, and because of the rapidity and regularity with which prices have increased, the company has come under particularly strong criticism. As the dosage carried in the device costs only around $1, and the technology itself - which costs only a few dollars more to produce - appears largely unchanged since Mylan took over, question marks have been raised as to why patients are being charged so much more now.

#3: What Has Been the Reaction to the Price Hikes?

The Outcry

Criticism has been widespread, in public and political circles. Democrat presidential candidate Hillary Clinton has labelled developments as ‘outrageous’, while the American Medical Association has urged Mylan to “rein in these exorbitant costs”. And, according to further reports, the Senate is to carry out an investigation into the company that could see it pulled before Congress. Upon announcing the price hikes in August 2016, Mylan also suffered on the markets with stock losing over 5%, and reports emerged of Americans shopping for EpiPens in other nations, including Canada, where costs are significantly lower. Mylan CEO Heather Bresch has insisted that she is as ‘frustrated’ as the American public, however. Bresch cited problems with the US health care system in general as reason for increased EpiPen cost, referring to a health care ‘crisis’ and comparing it to 2007’s mortgage financial crisis. According to Bresch, EpiPen’s list price of $608 reflects how it is passed through four or five companies before it can be sold. Bresch noted Mylan’s net profit from every sale as $274, and she highlighted how heavily the company had invested in placing EpiPens in schools across the country.

#2: Is There a Price Gouging Trend in the Pharmaceutical Industry?
The Business

The US prescription drugs industry is proving exceptionally and increasingly lucrative, as the case of EpiPen falls into a wider gouging trend. According to the Journal of the AMA, between 2013 and 2015 net spending on prescription drugs in the US increased around 20%, and there are some recent high profile examples where companies have pushed spending up. In November 2015, the U.S. Senate investigated Turing Pharmaceuticals after it acquired rights to sell Daraprim, a life-saving pill that is used as an antimalarial drug and that treats toxoplasmosis in HIV-positive patients. Within weeks of taking over, Turing increased the cost of the drug by over 5,000% from about $13.50 to $750 per pill. Again, this isn’t an isolated case, as a 2014 House of Representatives report found that as many as 10 generic drugs had been subject to massive price hikes of 420 to 8000% compared to 2013. Controversially, in the wake of the EpiPen scandal, former Turing CEO Martin Shkreli also criticised Mylan, saying ‘these guys are really vultures’. Critics have have labelled the likes of Shkreli and Bresch as ‘profiteers’ using human need for personal gain. While some patients suffer, business appears to boom. 

#1: What’s Next for the People Who Need the Drug?
Alternative Sources

As an EpiPen can be a life-saving piece of equipment for thousands of people, the demand for the device isn’t likely to decrease, meaning those in need of an autoinjector may be forced to look elsewhere if they can’t afford it at US prices. Lesser-known brand Adrenaclick offers a similar, much cheaper but slightly more complicated product to use, obtainable if prescribed by a doctor. As Mylan holds such a monopoly on the market, other alternative brands are scarce. Mylan itself insists that there are ways for lower income families to get an EpiPen, however. In the wake of the criticism, the company announced plans to triple its co-pay assistance program from $100 to $300, and that it will increase eligibility for the program, meaning more patients will qualify for discounts. Mylan further announced on August 29th, 2016 that a more affordable, generic product would be put on the market in the following weeks. Though it’ll be identical to the EpiPen - other than the lack of the brand name - its list price would not be, selling for approximately $300. As of the same date, the list price of the original is set to remain the same, though. While US lawmakers have welcomed such moves, they have also said that more needs to be done; a spokesman for Hillary Clinton called the plans ‘insufficient’, and other lawmakers have labelled it a PR stunt. For allergy sufferers and parents of children at risk, the issue remains the same, regardless. An EpiPen is vital for their child’s safety, multiple devices are often required, they can’t be reused and they have a short shelf life – so at more than $600 for just two pens, it’s a problem that just doesn’t add up.

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