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Epi-Pens, Politicians and Free Markets
by Sal Monela

By now, most people have heard about the 600% price increase in a medication called an Epi-Pen. The Epi-Pen is a device carrying a drug used by people who experience severe, life threatening allergic reactions.

Needless to say, a number of people, including politicians, have been critical of the manufacturer, Mylan, and it chief executive, Heather Bresch for imposing such an astronomical cost increase on a medication on which the patent has expired. But don’t worry Heather; Kevin Williamson writing in the National Review has heroically ridden to your defense.

According to Williamson “Mylan, recently raised prices on the EpiPen and several other treatments they sell. An EpiPen dose might cost as much as $600, which is . . . about half of what the typical American family spends on cable TV in a year. Yeah, sure, little Bobby’s face is swelling up like a North Korean dictator’s and his kidneys are about to fail — but there’s two episodes left on Game of Thrones this season!” Yep, all we have to do is give up cable TV so we can have the resources to spend $600 to buy a lifesaving product that cost $100 a few years ago. But what if we don’t have cable TV? Lots of people give up things much more worthwhile than TV to afford their meds and other medical expenses. And how would we be able to be educated about the Epi-Pen if we don’t have TV and couldn’t see those ads that Mylan has recently began running that encourage us to “ask your doctor?”

Of course, Kevin argues that Mylan needs this price increase. He says “Epinephrine is unstable, and developing a way to store and deliver it reliably isn’t easy.” Thank you Kevin because I always thought that businesses included the R&D costs in the pricing when the product first goes to market. I never realized that they wait 15 or 20 years to include those expenses in the cost.

Williamson lays the blame on politicians and Obama Care for the price increase “Remember that medical-device tax? An EpiPen is a medical device.” Well, sorry to burst your bubble Kevin, but congress approved a moratorium on the medical device tax that is currently in effect and lasts till the end of 2017. Further, there is a retail exemption from tax on products normally sold to consumers. And lastly, maybe my math is faulty, but it’s really hard to convert the imposition of a 2.3% tax into a 600% cost increase.

Kevin provides further conclusive evidence that politicians are at fault “If we were relying on the intelligence, work ethic, creativity, entrepreneurship, scientific prowess, and far-sightedness of the members of Congress to produce treatments for allergic reactions or any other medical problem, we’d still have a million people a year dying from smallpox and preventable infections …We’d also be starving to death…These people are parasites. They make: nothing. They create: nothing. They produce: nothing.” While I might agree with some of Willimason’s observations about intelligence and work ethic of some members of congress, if I recall correctly, the Federal Government funds an awful lot of basic research (approved by Congress) without which we wouldn’t have many of those medical and technological breakthroughs and millions of people would be starving to death.

Kevin goes on to say “I don’t know how much Heather Bresch has in the bank, but without checking, I’ll bet you five dollars it is a good deal less than the Clintons have piled up in “public service.” I don’t know how much Heather has in assets either, but ABC just reported that her annual compensation has gone from $5 million in 2009 to $19 million today. I’d say that gives her plenty of discretionary income. Of course, the private sector has to pay astronomical salaries to attract talent, but in a comparable public sector position you are expected to work for peanuts.

The far right lives under the illusion that government doesn’t produce anything. Just looking outside my front window, I can see roads, a bridge, powerlines owned by a city carrying electricity produced by a federal agency, the BPA. Overhead are aircraft that took off from publicly owned airports and a short distance away is a major port owned and operated by a public port authority. At the same time, the private sector engages in a number of activities including high frequency trading and short selling that produce absolutely nothing other than move money around between investors. In other words those who engage in these activities may be considered “parasites. They make: nothing. They create: nothing. They produce: nothing.”

The National Review prides itself on being an intellectual defender of conservatism. Most of Williamson’s article is a hysterical rant against liberal politicians, in particular Hillary and Bernie. It’s also full of dubious information. If the editors believe that this is a thoughtful defense of corporate price gouging, then I will be happy to sell them that bridge in front of my home. But there is one very good point that Williamson made. He showed us why unfettered capitalism is such a lousy idea.

photo credit: EpiPen Auto Injector via photopin (license)

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  • The pharma model has changed to where most basic research is done by public institutions, typically universities. Small startups then take those developments and drive them into clinical trials where big pharma can then pick the best candidates without having to spend all of the R&D money.

    Government…tax payers…pay for new drug development. Big Pharma should not be allowed to stick it to patients…tax payers…just because they can. However, Big Pharma owns Big Politics..soooooo….

    • STinMN

      It isn’t just pharma that does this, most industries have moved to this model, then either cherry pick the best or purchase the startup that moves it forward. And industry will not invest in the basic research, but is more than willing to profit from it. Once again we the taxpayers are subsidizing private businesses.

    • SDB

      Although there is plenty of University medical and lab research, the idea that small startups take this to clinical trials is far from the norm. While it is true that some University research and fellowships are funded by the government, that total is actually quite minimal. Such grants are ultra competitive and very hard to come by. Most startup have neither the resources or finances to actually bring a drug to market. The fact is, on average, only one out of 100 drugs actually make it to market, a 99% failure rate. But no one cares that the pharmaceutical companies have to bare the cost burden for the failures, so why should they not reap the benefits of their successes? It’s an investment. Sometimes it pans out, sometimes it does not. But they took an R & D risk as well as a market risk to bring things to market to make our health better and our lives more comfortable.

      • rudi

        Mylan didn’t develop Epipen, it acquired the drug when it bought another company. The price of Epipen is do to corporate greed, not R&D costs.
        http://www.businessinsider.com/epipen-cost-increase-healthcare-insurance-2016-8

        Epinephrine, the actual medicine in EpiPens, is cheap. According to public-health nonprofit Management Sciences for Health, epinephrine’s 2014 price in some parts of the developing world was less than $1 a milliliter. One EpiPen auto-injector from Mylan contains about one-third of a milliliter.
        When Mylan acquired the auto injectors as part of a 2007 deal, they were priced at about $57, according to Truven Health Analytics.

        Today, the list price for a two-pack is $608. What happened?

        • SDB

          I am not saying they bore the cost of R & D on the Epi-Pen, but they have absorbed the costs on thousands of other drugs that have not made it. This was an investment for them. Who is to say what profit should be? A good friend of mine complained about the cost of a flight from LA to NYC. They said it was not fair and that the Airlines makes so much money! I said, if you do not like the cost, take a bus. They said”do you know how long that would take? So they put a value on the service provided because they appreciate the convenience, but do like to bare the cost. I know Epi-Pens save lives and it is not about convenience. When did profit become a dirty word? Why is profit synonymous with greed? Where is the distinction if any? Who is it that decides? Why does the public show outrage when they want something but don’t want to pay for it? Why is it owed to them, just because they want or need it? I do not lack compassion I just don’t believe that the public has a right to place demands on companies who provide wanted / needed products or services.

          • SDB

            pardon the spelling errors – yikes

        • Bob Munck

          Today, the list price for a two-pack is $608. What happened?

          Capitalism.

          • Slamfu

            Capitalism.

            Well it’s important to distinguish what is going on here from Free Market Capitalism, which works, and which this is not. In fact, what is going on here is the direct and natural result of what happens when one of the core tenets of the Free Market formula is ignored, namely that there needs to be lots of buyers AND sellers. In this case, apparently Mylan is the only game in town, so they can jack up the price as much as they want. If the market were open enough they had actual competition for the EpiPen market, as Adam Smith says all products should, there is no way they’d be able to sell it for as much as they are without losing all market share.

            Capitalism done the way Smith said to do it works well, extremely well. This right here is merely just a company having a monopoly and sticking it to consumers, and ancient and hurtful practice which predates Free Market Capitalism by, oh, pretty much all of human history.

          • Bob Munck

            what happens when one of the core tenets of the Free Market formula is ignored, namely that there needs to be lots of buyers AND sellers.

            Perhaps there once were lots of them, but the Free Market allows its capitalists to manipulate government to eliminate other sellers and in this case to increase the number of buyers.

            It starts with the fact that we had to have a patent system and the government/justice system to enforce it, because the developers of an innovation had to be able to profit from it. But that same need made it possible for them to make profits beyond the reasonable and to extend the period during which they were protected from competition. Our political system makes it easy for campaign contributions from special interests to politicians and “revolving door” situations for bureaucrats to manipulate the political and regulatory systems to their advantage.

            Having secured a market free from competition, Mylan is able to charge unreasonable, one might say obscene, prices for EpiPens. Some number of people will die because of that, in a direct cause-and-effect relationship. Would it not be possible for a court of law to find them guilty of attempted murder immediately and of homicide when it has been established that someone has died? I’m thinking that a long prison sentence could be distributed among corporate executives and major stockholders in amounts proportional to the number of shares they own.

          • Slamfu

            I think there might be a misuse of a word here, do you think that Free Market means free from regulations? Rather, what does Free Market mean to you?

          • Bob Munck

            what does Free Market mean to you?

            I believe that the textbook definition is one in which prices are determined entirely by supply and demand. That’s why I started out discussing the patent system, because it interferes with S & D by restricting supply and allowing a (supposedly temporary) monopoly. However, if you don’t have a patent system, the Free Market won’t work, because the incentives that drive it are weakened or missing. Why invest in development of a new widget if your competitors can steal the design from you and prevent your recovering that investment? Are not the rules that make up a patent system essentially regulations?

            Perhaps I’m saying this badly. My fundamental belief is that all activities having to do with health care should be non-profit, that the incentive in that area should be altruism, the basic human desire to help other people. It may be that I’m disagreeing with your contention that health care should operate in a free market.

      • This is my business SDB. Your information is about 10 years old and/or wrong….except for the 99% failure rate. That is actually true.

        • SDB

          I stand corrected – I have no problem admitting when I am wrong and I acquiesce to your expertise. Cheers!

  • Bob Munck

    A few facts: Epinephrine, also known as adrenalin or adrenaline, was first isolated in 1901 by a Japanese chemist, J?kichi Takamine. He had recently immigrated from Tokyo to New York, was extremely wealthy due to a prior chemical development. It’s likely he funded his own research.

    The delivery mechanism under discussion, the EpiPen, was developed in the mid 1970s by a Maryland company under a DoD grant. it delivers a single dose of epinephrine costing about $1. The physical mechanism probably costs a similar amount to manufacture. Like most important drugs, the EpiPen costs considerably less in the rest of the world. Obviously we can say to Mylan and Heather Bresch “You didn’t build that.”

    I developed a life-threatening allergy to lamb in the mid-80s, requiring me to have available an EpiPen. (It’s a weird allergy; I go into anaphylactic shock about 8 hours after eating lamb. I’ve had two close calls where dishes unexpectedly contained that meat.) The price of an EpiPen doesn’t bother me, due to Medicare, but it does bother me that my prescription renewals transfer a big chunk of money to the very rich. I think I’ll look into getting my next EpiPen from some other source.

  • JSpencer

    “The National Review prides itself on being an intellectual defender of conservatism.”

    The National Review gave up any claim to being an intellectual anything when WFB left it. In any case, if you want to blame someone, blame congress and the stupid voters who put these do nothings into positions of public trust.

  • SDB

    I do not know the number of people who require Epi-Pens in the U.S. I have seen figures stating that between 150-200 people die in the U.S. annually from anaphylaxis. I suspect there are more people who require Home Defibrillators in the US than require Epi-Pens. I think most of the outrage is born from the idea that the Pharmaceutical companies are making a profit. I am not a hypocrite. For twelve years my son required a biologic inject-able that was snot covered by insurances. It cost $218 per day – that is not a typo; 80 K per year….totally out of pocket! But instead of being angry at the pharmaceutical companies or the insurance companies (OK – I was a little pissed at the insurance company), I was grateful! I was grateful that the pharmaceutical companies actually spent money to develop something that could help my son’s somewhat rare condition. He is fine now. Absolutely fine, healthy, and fit. But I assure you this, were it not for the profit they made on his biologic, the pharmaceutical company would have never performed the R & D and brought this to market. The media has vilified these companies because they believe that personal well being should be the primary concern of the corporation and there should be some unwritten rule that if you help people, you should do so out of pure goodness. Sounds lovely. But should this then trickle down to everyone who has a support job which is related to personal services? Should nurses work at minimum wages just because they help people? Doctors? Should truck drivers who deliver medicines or construction materials to hospitals work at reduces rates? Should construction workers who build hospitals, churches, and community centers also work for a cut in pay because it would be noble to do so? Of course I am not advocating for such, but then why should pharmaceutical companies be singled out?

    • SDB

      ***snot covered? ooops

    • again….Pharma doesnt develop drugs anymore…
      Startups receive VC money to move the drugs forward into clinical trials in the hopes that Pharma will buy them once they have shown efficacy.

      The model you are talking about is old. Many very big pharma companies have shutdown their R&D completely. I have a friend who was in charge of an R&D department at a large company. She is now in charge of technology scouting.

      • Kudos for standing your ground, SL, and kudos to SDB for “standing corrected.”

        • eehh…too many likable people around here.

          • SteveK

            That’s one of the joys of TMV… And what makes it unique.
            Not having a comment editor is another. :o|… 🙂

    • Sal Monela

      Of course pharmaceutical companies must make a profit. But why are drugs cheaper in other countries as compared to the US? The governments of most industrializes nations negotiate drug prices on behalf of their citizens through their national health care systems. Americans on the whole pay higher drug prices than any other country. If a pharmaceutical company couldn’t make money selling to Canadian, British or other health system, it would be logical to assume they would stop doing business there. Why should only Americans contribute to the profits of drug companies? When did we all sign up to do that?

      • I think we signed up by voting…
        This stuff all gets fixed by taking money out of politics. I would like to see a politician run on amending the constitution to remove money’s “free speech”.

        • KP

          What would you do if Trump ran as a candidate suggesting that?

          Good idea but not you? 🙂

          • Sal Monela

            If Trump appoints conservative justices to the Supreme Court big money isn’t going to come out of politics. Conservative justices helped get us where we are.

          • JSpencer

            “If Trump appoints conservative justices to the Supreme Court big money isn’t going to come out of politics. Conservative justices helped get us where we are.”

            Bingo. Simple cause and effect.

      • Slamfu

        But why are drugs cheaper in other countries as compared to the US?

        Surely for reasons that only the gods will ever know, some questions were not meant to be known by man! OR…..

        For already clearly identified reasons that just about every other industrialized nation on Earth has figured out, but gullible people here in the US(read: Conservatives and elected Republicans mostly) wish to ignore in favor of debunked talking points and ideologies.

  • Bob Munck

    On another thread (guns, guns, guns) I wonder about the possibility of 3D-printing the mechanism of an EpiPen and charging it with epinephrine bought in bottle form and costing about 85¢ a shot. On second thought, is there any reason you couldn’t recharge a used or expired EpiPen? Sure, all kinds of sterility and contamination precautions would have to be taken, and it would probably end up being illegal, but it sounds like a nice little business, potentially quite profitable (if you don’t become greedy like the big pharms).