Image source: Getty Images.
Forty-three million Americans are at risk of suffering a life-threatening allergic reaction, and the vast majority of people who suffer one turn to Mylan N.V.'s (MYL +0.00%) EpiPen to halt it in its tracks. The EpiPen's lifesaving nature makes it a must-have in patient purses and backpacks, but a long record of price hikes has landed the generic giant on the hot seat.
What is an EpiPen, anyway?
The EpiPen Auto-Injector is a delivery device that allows patients or caregivers to inject epinephrine into the thigh muscle. Because epinephrine suppresses the immune system, it can reverse the symptoms of a life-threatening allergic reaction.
Epinephrine is a synthesized version of adrenaline, which is a naturally occurring hormone produced by the body under stress. It increases your heart rate and improves breathing to create a short burst of energy. Epinephrine was first artificially synthesized in a lab by German chemist Friedrich Stolz in 1904.
Epinephrine has been around for a century, but the EpiPen has only been available since 1980. Prior to Merck KGaA (not to be confused with America's Merck & Co.) launching the EpiPen, epinephrine was administered via needle and syringe. However, administering epinephrine that way can result in incorrect dosing, especially during an emergency. EpiPens reduce that risk because they are prefilled with the correct dose of epinephrine and they contain a spring-like needle that exits the tip of the pen to penetrate into the muscle. In short, EpiPens are far simpler and safer to use than syringes.
What's Mylan's role in all this?
Mylan acquired EpiPen from Merck KGaA in 2007, when EpiPen was a niche product generating about $200 million in annual sales.
After acquiring EpiPen, Mylan began an aggressive marketing campaign to raise awareness of the risks associated with severe allergic reactions and to promote the benefits of EpiPens. The marketing program included significant lobbying that resulted in 47 states passing laws that make epinephrine auto-injectors available in schools.
EpiPen has gone on to become the best-known epinephrine auto-injector sold globally, and because of its popularity, the EpiPen name has become synonymous with epinephrine auto-injectors, even those manufactured by competitors.
Image source: Stockmonkeys.com via Flickr.
Competition derails
Until last year, Mylan's EpiPen was battling for market share with Sanofi's Auvi-Q, an auto-injector that received the FDA's green light in 2012.
After Auvi-Q's launch, the EpiPen remained the dominant auto-injector on the market, but Auvi-Q's presence did help keep a lid on prices. That changed, however, when reports surfaced that Auvi-Q patients were having troubles with it. Through Oct. 26, 2015, there were 26 reports of suspected Auvi-Q device malfunctions in the U.S. and Canada, and while there were no fatalities, Sanofi voluntarily recalled all of its Auvi-Q auto-injectors and exited the U.S. market.
Sanofi's departure made Mylan's EpiPen the only game in town for patients wanting an auto-injector, but that was initially thought to be a short-term advantage. Teva Pharmaceutical (TEVA 0.45%) won the right to begin marketing a generic EpiPen in 2016, as part of a 2012 patent settlement.
However, Teva Pharmaceutical's plans were derailed earlier this year when the FDA rejected its application. The rejection extended Mylan's monopoly until at least 2017, when Teva Pharmaceutical hopes to refile for approval.
Image source: Getty Images.
Unchecked price hikes
Without any competition to keep prices down, Mylan bumped up EpiPen's price by 15% in the fourth quarter of 2015, and then by another 15% earlier this year. Those two increases, however, were far from the only price increases Mylan has taken on the drug over the years.
According to the Elsevier Gold Standard Drug Database, a pair of EpiPens cost $93.88 when Mylan acquired the drug. EpiPen's price increased to $264.50 by July 2013, and another 75% to $461 last summer. Currently, the pair costs over $600, and EpiPen generates $1 billion in annual sales for Mylan.
Complex system
Mylan doesn't deny its EpiPen price increases, but it does think health insurance companies deserve some of the blame for patients' sticker shock.
Increasingly, high insurance-plan premiums are driving consumers to switch to lower-cost plans with less generous coverage. Many of these cheaper plans are high-deductible plans that place EpiPen in higher drug tiers, requiring higher co-payments and coinsurance. The rising adoption of these less expensive health insurance plans means patients are contributing more to the cost of EpiPen than ever before.
Addressing the challenge
Mylan offered a coupon that cuts $100 off EpiPen's cost in the past and according to Mylan, that coupon allowed 80% of patients to pay nothing for their EpiPen prescriptions despite the insurance headwind. While that was good news for the 80%, it should be remembered that 3.6 million prescriptions for EpiPen are written annually, according to IMS Health, and that means that hundreds of thousands of patients are still being squeezed.
Because so many patients are paying more for their EpiPens, a public uproar has emerged that's enlisted Presidential hopeful Hillary Clinton's support. Clinton issued statements on Twitter and Facebook addressing the EpiPen outrage and called on Mylan to do more to help patients.
Today, Mylan responded by boosting its coupon program from a $100 discount to a $300 discount. The company also doubled eligibility for its patient assistance program to 400% of the federal poverty level, which means that out-of-pocket costs for the un- and under-insured will be eliminated for many. For example, a family of four with $97,200 in household income would get their EpiPen 2-Pak for free.
The move is a positive step in the right direction for patients, however, it doesn't absolve Mylan from its past pricing decisions and it's unclear what impact this program will have in the future if Mylan increases prices again. Ultimately, the launch of a generic alternative by Teva Pharmaceutical may be the only thing that keeps EpiPen prices in check over the long-run. After all, in the battle against high prices, competition remains a powerful weapon.
