Mimsy Were the Borogoves

Editorials: Where I rant to the wall about politics. And sometimes the wall rants back.

Why does the EpiPen cost so much?

Jerry Stratton, August 31, 2016

Combopen

If the FDA were to approve copies of this device, available to soldiers since the seventies, the cost of an EpiPen competitor would likely drop to ten or twenty dollars—and the cost of an EpiPen accordingly.

People are complaining, rightfully so, about Mylan’s overpricing of the EpiPen. But most people are complaining about things that cannot be changed, when there are simple changes that could fix the problem in the future. They’re complaining about Big Pharma, rather than the systemic causes of Big Pharma. Part of the problem is that they don’t understand the problem. For example, one online petition complains that:

The EpiPen contains only $1 worth of medicine, but you’re charging hundreds of times that amount.

But it isn’t the medicine that costs so much money. It’s the pen itself. That’s what Mylan has a monopoly on, and that monopoly on the pen, not on the medicine, is the reason that the EpiPen is so expensive.

A lot of people are also complaining, based on headlines, that the Epipen was “developed entirely with taxpayer money” or that “American taxpayers funded 100% of research used to developed Big Pharma’s EpiPen”. But the articles behind those headlines don’t back them up. The articles I’ve found don’t mention any money going from the government to inventor Sheldon Kaplan or Survival Technology, the company Kaplan worked for.

So while I’m generally in favor of publicly-funded research being in the public domain, that doesn’t seem to be the case here.1

But the original version of the EpiPen, the ComboPen, was invented in 1973. The earliest patent I can find was approved in 1987. That patent ran out in either 2004 or 2007.2 Viable generic versions of the EpiPen should already be available, but they’re not.

The problem with the EpiPen is not that patents are granting Mylan a monopoly. The problem with the EpiPen is that big government is granting Mylan a monopoly. Big Pharma is the inevitable result of big government. The government has so much power over the health care market today that big companies—especially big companies with big connections, like Mylan, whose CEO is a Senator’s daughter3—can lobby to give themselves a monopoly. In this case, the FDA has literally shut down alternatives to the EpiPen—for reasons that would also apply to the EpiPen if the regulations were followed in the same way for each product. The FDA is also holding back new competing products with a mass of red tape. They’ve even blocked a generic version of EpiPen.

It seems like every time someone comes up with a product to compete with the EpiPen, the FDA swats them down. It costs millions of dollars to bring an EpiPen-like product through government regulations. With the FDA seemingly helping Mylan maintain its monopoly, potential competitors are going to be less likely to spend that money just to be blocked by the FDA in the end.

Because the basic patent has run out, anybody should be able to make a generic EpiPen of the kind that was originally brought to market. But they aren’t, because the FDA is blocking them.

Government bureaucrats often find it easier to deny than to approve. Early-to-market products, however, often get past regulators because regulators don’t yet know the best way to entangle the product in red tape. But after time, regulators start to see problems they didn’t see before, such as, in the case of EpiPen, people using the product incorrectly and failing to cause an injection. Regulators then look for this problem in competitors, and block competitors from the market.

The system is almost designed to create monopolies, and its design definitely creates monopolies. Government funding tends to favor one or only a few paths of research, reducing competition. Government control over health care is so big and so complex that big companies find it easy to game the system, including by hiring relatives of both government bureaucrats and elected officials. And government bureaucracies find it easier to block competing products than new products.

The left, of course, wants to add more government bureaucrats to fix prices. But giving government bureaucrats the ability to fix prices won’t help. Besides killing innovation, it will only mean more monopolies and higher prices. Bigger and more-connected companies like Mylan will influence government bureaucrats to set their competition’s prices too high to sell or too low to stay in business. Making the system more complex always helps bigger companies and hurts smaller competitors.

I strongly recommend David Goldhill’s Catastrophic Care for a description of how big government interacts with health care companies to produce outrageous prices.

In response to Why we must not ration health care: Rationing health care means fewer cures.

  1. If anyone has a source for Epipen being completely funded by taxes, I’d love to see it—I just cut out half of this blog post because what I thought was true wasn’t.

  2. The difference depends on whether a patent length of approval date+17 or filing date+20 is longer; the longer length applies. The earliest EpiPen patents I can find were approved in 1987. It’s unlikely that they were filed in 1987, but if they were, the patent would have run out in 2007 (filing date plus 20 years). If the patent were applied for in 1984 or earlier, the patent would have run out in 2004 (approval date plus 17 years).

  3. Mylan CEO Heather Bresch is the daughter of Senator Joe Manchin, Democrat from West Virginia.

  1. <- Public Citizen single-payer
  2. A dog of a law ->