We want to demonize these drug companies like Mylan Labs (MYL) that succeeded in putting through price increases for EpiPen, an allergy treatment that's a necessity for millions, simply because it could.
I watched, rapt, as my colleague Brian Sullivan interviewed Mylan CEO Heather Bresch about the circumstances surrounding the price increases. For some, Bresch was the face of greed, an all-too-well-paid executive who is preying on the desperate in order to clean up on behalf of shareholders. Judging by social media, some were convinced she is a heartless, arrogant individual who pretended to sympathize with the aggrieved and even feigned outrage herself about the price increases. She should just roll them back, right on television, giving Americans the same low prices you can get in other markets outside the U.S.
To others, though, she's simply doing her job, maximizing the company's return on a monopoly because no one's stopping her and we shouldn't expect her conscience to kick in if she works at a public company. Plus, why should the government step in? How else do we get these fabulous medicines if there isn't some sort of profit motive that's worth the risk? And, best of all, she's offering a compassionate program that that will help those who would otherwise find the EpiPen out of reach.
Where do I come out? First, I have faith in the capitalist system to be able to come up with a competitive product that ultimately drives the cost of this EpiPen down and down big. In fact, there was a cheaper alternative at one point from another company that would have prevented what I do perceive as gouging. I know; I bought it before the FDA took it off the market.
Second, I am against monopolies where there shouldn't be one. We don't let the utilities charge whatever they want. They are regulated. We specifically endorse higher prices for what are known as orphan drugs in this country, where the patient population is too small for any drug company to take the risk of spending billions of dollars on development of something for which there can never be a payoff. These drugs seem outrageously priced but are almost always priced below the cost of the care that a health insurer may have to bear.
Then there's the gray area: a monopoly where prices can be increased readily and the insured bears the cost, provided that a patient has insurance. But a patient with a high deductible is really hung out to dry when the price tag is elevated to $600 for a pair of pens.
We don't know for sure -- and I wish we did -- but some say Mylan was able to put through this price increase because it was hoping to sneak in some extra dollars until a competitor hit its stride. The competitor would have driven down the price but good, but the product, which by the way, I bought, was pulled from the market because it couldn't be dosed properly.
So Mylan got away with it and the big pharmacy benefit managers who are supposed to negotiate better pricing for their insurance clients failed to do so. Without competition, it had the leverage.
And therein lies the problem. Unless we insist on compassionate price breaks, then we really have to hope companies have a heart, so to speak. Unless the government wants to regulate monopolies or become the single payer that can be antithetical to patent production and therefore drug research, we are stuck with cajoling and embarrassing companies that make unreasonable price increases, or whatever the public and the politicians deem to be unreasonable.
But the real issue is competition. Sadly, just because something's generic doesn't mean there's competition. To get personal, I take a particular medicine for which there used to be a ton of competition. No more, and the company that makes the drug and the device it uses is now a monopoly. The price for each use? Despite the actual medicine's cost per dose being less than $10 per shot, each shot is $125. I often have to take 20 shots a month, sometimes many more. That's $2,500 a month instead of $200. Insurance won't pay for it. If another competitor were to get in, the price would plummet, that's how big the margins are.
Don't cry for me. I am lucky enough that I can afford it. But it's a glitch in the system, one that needs competition or more regulation than we have. Executive embarrassment and presidential candidate tweets, as powerful as they can be, just don't solve the bigger problem.