EPI-PEN Highlights Systematic Flaws In Healthcare
Everyone is Shocked!, Shocked (to borrow a phrase from Captain Renault) that a pharmaceutical corporation is looking to maximize its profits on the products for which it purchased the rights to a patent on.
It’s a company, and thats what companies are there to do, maximize profits for its shareholders. People owning Mylan stock over the last several years certainly aren’t complaining, and neither are most of you who are insured by a commercial insurance policy.
The fact that the Epi-pen’s price has increased over 400% in the last several years to the current $600, should come as no suprise given the lack of any competing product in it’s space.
In Pittsburgh, the standard Silver level plan offered by both UPMC and Highmark/BCBS, offer the Epi-pen as a tier 2 drug (Brand Formulary) and depending which carrier and which plan, you probably are looking at a co-pay for 2 Epi-pens of roughly $45–50.
If Mylan raises the price of the Epi-pen again to $800, your copay is still going to be $45–50. However, as you may surmise, your health plan is paying the difference, and considering all the different expenses your health plan has to cover in a year, one Epi-pen refill will (depending on your age/premium) likely cost your insurance company 2 months or more worth of premium. Thats a pretty big chunk.
We don’t really know what UPMC and Highmark are paying for the Epi-pen’s. We would hope that they have some sort of discount deal in place to not pay full retail. But they are the party with the most to gain or lose in this controversy. They are in a tough spot though without an alternative, as they need to make these devices available through their plans, and without an alternative, Mylan can pretty much charge what they want.
There are several issues that apply not just to the Epi-pen but other prescriptions and medical devices as well. On one hand, competing injectors have not made it through FDA approval, although I’ve read that the FDA is applying a higher standard to approving competing devices than the standard that the Epi-pen originally passed. There’s also the patent that Mylan holds that requires any alternative device to use different technology to achieve the same result. Free-market capitalists (Rand Paul, et al) point to the FDA and overregulation as the reason we dont have competition in this space. However Patent law is not really government regulation, and “caveat emptor” is not a global approach to pharmaceutical innovation that I want to be a party to! Go look at Theranos as a case study of a health sciences company run amok at the expense of the patients who relied on the blood testing products it produced. There’s a need for FDA oversight, just a question in this particular case if it’s too much? Perhaps a bigger question would be how we allow big pharma to lobby and impact government oversight?
On the other hand, there are people who believe that the pricing hikes are the result of not enough government oversight in pricing medications. They point to congress passing legistlation the prohibits the government from negotiating the price of prescription drugs (when they created Medicare Part D). Granted, Part D is offered by private insurers (not the government) and the insurers have the ability to negotiate with the pharmaceuticals, however, this ban on government negotiations is viewed as a roadblock to more systematic government price controls.
Mylan is now in damage control mode. They are increasing their efforts to make sure that their price hikes are softened on the patient end. Their press release today announce some sort of a “savings card” that would reduce out of pocket costs, and save up to 50% ($300) of the cost of the medication for someone paying full price.
Not being an attorney, I do have some questions about this approach. If a healthcare provider offered to waive the co-insurance on a procedure (for example a $2000 surgery, the patient had a 20% coinsurance under their insurance policy) and the healthcare provider offered to just waive the $400 as a courtesy to the patient, I always thought that represented a form of insurance fraud. If they were willing to accept $1600 for the procedure, that should have been billed to the insurance company, not $2000. How is what Mylan is offering different than that example? Is it ok, just because it is offering it to a targeted income group — there is some wiggle room in federal law for financial hardship, it’s just not clear if this would apply here?
I do know that their approach does several things. 1. They still collect the full amount they would have from the insurance companies. 2. They are actually making it easier for more people to buy more of their products. If the savings card eliminated a persons $45–50 copay, one would think that everyone eligible would use that benefit more than they currently do. 3. They probably see this as an opportunity to market the importance of having one on hand as a preventive measure and hope to turn this into a situation (no publicity is bad publicity) where they can benefit further.
The problem is that the cost to the insurance companies is payable in full +20% for their services. If an insurance company pays $550 for that Epi-pen, and you pay $50 copay. The insurance company will need to collect an additional $660 from consumers to pay that claim and administer the plan. Every time you see health premiums go up at renewal, you realize there is no free lunch (or free epi-pen if your lunch had nuts you were allergic to).
