How NOT to Get a Raise: Hike the Price of EpiPen
This morning, EpiPen-maker Mylan announced that it would release a generic version of its product for $300, half the current price of EpiPen. This comes on the heels of last week’s announcement that the company would boost the value of the coupon that it offers to commercially insured patients from $100 to $300.
“Those two measures, however, did not stem the public furor, in part because the company kept the list price the same, meaning the overall cost to the health system, mostly borne by insurers and taxpayers, would remain the same,” writes Andrew Pollack at The New York Times. Pollack also notes that the cost of the generic will be three times the price of EpiPen in 2007, when Mylan acquired it.
The steadily rising price of EpiPen has been a PR disaster for Mylan and its CEO, Heather Bresch, in no small part because Bresch’s compensation, and that of Mylan’s board, is tied to earnings.
“If the company can get to earnings per share of $5.40 (the goal is actually $6, but there’s some wiggle room) by 2018, Bresch and her team stand to make millions in stock payouts,” explains Linette Lopez at Business Insider. “And because EpiPen is the company’s star product, Mylan is unlikely to pull off those gains without its help.”
Eighty-seven percent of Bresch’s compensation, and 82 percent of the executive board members’, is tied to Mylan’s stock price.
Bresch’s Take: Don’t Blame Me, Blame the System
It’s been a rough couple of days for Heather Bresch. In the media, many made comparisons to Martin Shkreli, the “Pharma Bro” who increased the price of Daraprim, a medication used to treat toxoplasmosis in AIDS patients, to $750 a tablet. Clinton campaign spokesman Tyrone Gayle called for a price cut, not further rebates, saying, “Since there is no apparent justification for the price increase, Mylan should immediately lower the overall price of EpiPens.”
Bresch has gone on the defense.
“No one is more frustrated than me,” Bresch told CNBC’s Squawk Box last week, claiming that the $608 list price of EpiPen reflects not only Mylan’s net sales price of $274, but the outcome of a healthcare system in which “four or five hands that the product touches and companies that it goes through before it ever gets to that patient at the counter.”
According to Bresch, high-deductible health insurance plans have exacerbated an existing problem, which is that many consumers in the U.S. have to pay both health insurance premiums and full list price for medications.
“The patient is paying twice,” she said. “They’re paying full retail price at the counter, and they’re paying higher premiums on their insurance. It was never intended that a consumer, that the patients would be paying list price, never. The system wasn’t built for that.”
Intentionally or not, the system is built, however, to effectively subsidize lower drug costs in Europe, where drug prices are limited by the government, something Bresch acknowledges to CNBC.
What Happens Next?
Meanwhile, in the U.S., it’s still possible to increase the price of a drug 400 percent in less than 10 years—but it’s not without potential complications. At Bloomberg Politics last week, Anna Edney and Billy House speculated that Bresch could be called before Congress.
“If lawmakers follow the usual script, Bresch could get called up to Capitol Hill next month to explain her company’s justification for raising the price on the life-saving allergy shot,” they write. “But that could be awkward, since she’s the daughter of Democratic Senator Joe Manchin of West Virginia.”
Tell Us What You Think
What’s your take on Bresch’s explanation for the EpiPen price hike? Talk to us on Twitter or leave a comment.