On Wednesday The Wall Street Journal posted an article about the current controversy about the cost of an EpiPen. Anyone who understands free market economics has been scratching their head trying to figure out why there was no competition to manufacture this product (and thus a more reasonable price). Well, The Wall Street Journal article provides an explanation. For the moment, I am going to overlook the fact that the company involved made a large donation to the Clinton Foundation and that the person in charge of the company is the daughter of Democratic Senator Joe Manchin.
The article at The Wall Street Journal explains:
In a statement, the Democrat (Hillary Clinton) assailed the “outrageous” cost of EpiPen, an emergency treatment for allergic reactions known as anaphylaxis, and she demanded that drug maker Mylan “immediately reduce the price.” Federal and Senate investigations are pending into these spring-loaded syringes filled with epinephrine (adrenaline) used primarily by children with life-threatening sensitivities to food or insect stings.
Mylan has raised the price of EpiPen in semiannual 10% to 15% tranches so that a two-pack that cost about $100 in 2008 now runs $500 or more after insurance discounts and coupons. Outrage seems to be peaking now because more families are exposed to drug prices directly though insurance deductibles and co-pays, plus the political class has discovered another easy corporate villain.
Still, the steady Mylan rise is hard to read as anything other than inevitable when a billion-dollar market is cornered by one supplier. Epinephrine is a basic and super-cheap medicine, and the EpiPen auto-injector device has been around since the 1970s.
Thus EpiPen should be open to generic competition, which cuts prices dramatically for most other old medicines. Competitors have been trying for years to challenge Mylan’s EpiPen franchise with low-cost alternatives—only to become entangled in the Food and Drug Administration’s regulatory afflatus.
Approving a generic copy that is biologically equivalent to a branded drug is simple, but the FDA maintains no clear and consistent principles for generic drug-delivery devices like auto injectors or asthma inhalers. How does a company prove that a generic device is the same as the original product if there are notional differences, even if the differences don’t matter to the end result? In this case, that means immediately injecting a kid in anaphylactic shock with epinephrine—which is not complex medical engineering.
But no company has been able to do so to the FDA’s satisfaction. Last year Sanofi withdrew an EpiPen rival called Auvi-Q that was introduced in 2013, after merely 26 cases in which the device malfunctioned and delivered an inaccurate dose. Though the recall was voluntary and the FDA process is not transparent, such extraordinary actions are never done without agency involvement. This suggests a regulatory motive other than patient safety.
The article concludes:
Mrs. Clinton claims the EpiPen price hikes show the need for price controls, and she says she’ll require drug makers to “prove that any additional costs are linked to additional patient benefits and better value.” Somebody in Congress should require the FDA to justify how its delays are advancing the same goals.
Price controls are not the answer–a government agency that cannot be corrupted by special interests is the answer. The FDA has been interfering with the free market, and the price of the EpiPen is exhibit A in the case against the FDA. I am all for safe drugs and clinical trials, but I am tired of federal agencies being used to pick winners and losers.