EpiPen has been in the news a lot lately, mostly about the recent price increases. This has led to strong backlash and criticism against its parent company, Mylan, and its CEO, Heather Bresch. There is a lot information going around. However, I’m going to try to summarize what I have read and pieced together.

Ok first things first:

EpiPen recently increases the cost of a 2-pack of its product to $608. This was a significant increase since it previously cost approximately $57 in 2007. Reference

Now, a lot can happen in 9 years, but that is a pretty significant increase.

However, to really understand what has been happening, we need to explore a few other things:

The Campaign:

Epinephrine auto-injectors (Generic) save lives. Period.

My wife has a shellfish allergy and she carries her EpiPen around with her at all times. I don’t eat shellfish around her at all because one time I ate lobster and just kissed her on the cheek afterwards and she broke out in hives. She has previously had an anaphylactic reaction. This is serious business.

Many people would agree with the above sentiment. There are various campaigns to make people aware of anaphylactic reactions, especially to peanuts, since they are so common. One of the campaigns which received a lot of media attention was Sarah Jessica Parker’s Anaphylaxis for Reel campaign. Honestly, the campaign itself is great. It spread awareness and made it much more easier to discuss how important epinephrine auto-injectors were. However, if you dig a little deeper, you see that the campaign itself is sponsored by Mylan. Then it becomes a case of whether this was an altrustic campaign or whether there was secondary gain. I, being a pessimist, favor the secondary gain. However, amidst these prices hikes and bad press, SJP has severed ties with Mylan.

The Monopoly:

Quick side story.

Back in 5th grade, I had a teacher who once asked us a simple question:

“What is this?” (Holding up a tissue box)

“Kleenex!”, everyone answered.

“Are you sure?”, she asked.

“Yes!”, everyone answered.

“Is tissue paper and Kleenex the same thing?”, I asked.

“I don’t know,Walter, is it?”, she answered.

This then caused a great debate amongst the students about what Kleenex was and tissue paper was. Many argued fervently that they were the same thing.

She used this example to describe how a Brand Name had so closely aligned itself with a Product, that people thought they were the same. This still holds true today.

EpiPen has done the same thing, but very quietly.

EpiPen has 90% of the market share of Epinephrine Auto-Injectors. Think about that. 90%. That’s a huge share of the market. You would be forgiven if you thought that EpiPen and Epinephrine Auto-Injectors are the same. Reference and Short History

Quick Summary is that EpiPen was developed in 1987 by Meridian Medical Technologies, now a subsidiary of Pfizez. The EpiPen itself changed hands a few times, but ended up with Merck KGaA, which sold to Mylan in 1987. Meridian still makes it, Mylan markets and sells it.

Two other devices exist, but one has been recalled and is unlikely to return. AdrenaClick is its only real competitor (7% market share).

Marketing and Legislation:

There was a strong push to get “Epinephrine Auto-Injectors” in schools and educate the public on its use. Of course, this makes sense. This is a life-saving device and should as readily available as an AED.

This prompted President Barack Obama to sign legislation in 2013 that helped public schools build up emergency supplies of EpiPens.

So then… you have the perfect storm. You have incredible brand equity, huge market share, increased public awareness, and new legislation to increase demand. So what do you do?

Well, what does everyone do in a MONOPOLY? Remember Martin Shrkeli?

You rise the price, from about $100 in 2008 to $600 in 2016.

The problem is, someone noticed. And then everyone heard about it. Then people started digging and they found everything above.

They didn’t like it.

The backlash felt is huge. Mylan and its CEO, Heather Bresch, are struggling with damage control, trying to redirect people’s attention at ObamaCare and poor access. They even tried to wave their hands around in the air and say, well, the patient usually isn’t even paying that much, it is covered by the insurance or Medicare/Medicaid. However, the public won’t buy that when they can see that:

According to Securities and Exchange Commission filings, Bresch’s total compensation went from $2,453,456 to $18,931,068 from 2007 to 2015. That’s a striking 671 percent increase.  Reference

So now what?

Well, you try some damage control. You offer “coupons” for the people that have to pay the $600 out of pocket to help reduce their cost to $300. That’s a nice try. However, it does not change the fact that insurance companies will have to eat that high cost… which they will then pass on to the patients next year in the form of higher premiums.

If you read my post about Free Lunch, then you know that we are all paying for those EpiPens and that high cost.

I think the fundamental problem is that Mylan, and probably Heather Bresch, believe that they are owed something for bringing awareness of the need for epinephrine auto-injectors. By pouring money into the campaign and lobbying for Congress to make these changes and savings all these lives, they deserve to profit from it.

That’s not how it works – you can’t claim to be a saint when you had secondary gain in mind from the beginning.

I don’t think Mylan has any remorse for increasing its price at all. I think it only regrets someone noticed.

Long story short, it’s a bad sign when your only defender is Martin Shrkeli.

“Earth provides enough to satisfy every man’s needs, but not every man’s greed. ” Mahatma Gandhi

TL;DR

EpiPen had incredible brand equity, huge market share, increased public awareness, and new legislation to increase demand.

It had no real competitors.

So it raised prices, like all monopolies. Unfortunately for them, someone noticed.

Then everyone noticed.

They tried to run interference with blaming Obamacare and throwing out coupons, but people saw through it.

When your only defender is Martin Shrkeli, that’s bad news.

-Sensei

Agree? Disagree? Questions, Comments and Suggestions are welcome.

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