PLEASE READ THE CASE STUDY, AND PREPARE THE PPT FOR THE ABOVE QUESTION.

Mylan and the EpiPen: Increased Access or Price Gouging?

In September of 2016, Heather Bresch, the Chief Executive Officer of Mylan, was called to testify before the House Oversight and Government Reform Committee, part of the U. S. Congress. The committee planned to ask Bresch questions about the $608 price tag that was attached to the two-pack of EpiPens sold by her company. Bresch had worked her way up through the company, and she considered EpiPen important to her as she had personally championed the brand over the years.

Bresch was proud of EpiPen’s success, and she did not plan to admit that the company was at fault (George, 2016). After all, companies like Mylan existed to make money and create a profit for their shareholders. And, in this case, the insurance companies were partly to blame because consumers had to pay more out-of-pocket for medications. However, despite her plan, Bresch wondered if her answers would satisfy the House Oversight and Government Reform Committee members? How would they judge her and Mylan’s actions?

Mylan

Bresch’s company, Mylan, was founded in 1961 with the mission of “helping people in small West Virginia towns and rural communities gain access to affordable medicine” (Mylan is a global healthcare company, n.d.). By 2007, Mylan had grown to become a global firm by having purchased Merck’s generic pharmaceutical division and it touted that its most valuable asset was its global workforce. Its mission was as follows (About us, n.d.):

At Mylan, we are committed to setting new standards in healthcare. Working together around the world to provide 7 billion people access to high-quality medicine, we:

· Innovate to satisfy unmet needs;

· Make reliability and service excellence a habit;

· Do what’s right, not what’s easy;

· Impact the future through passionate global leadership.

When Mylan purchased Merck’s generic pharmaceutical division, the company acquired EpiPen, a treatment for anaphylaxis (i.e., a serious allergic response). Its website stated that “At Mylan, we put people first, trusting that profits will follow” (Social responsibility at Mylan, n.d.). This philosophy corresponded with the efforts associated with corporate social responsibility (CSR), which “encompassed not only what companies do with their profits, but also how they make them” (Harvard Kennedy School, 2014).

Anaphylaxis

Anaphylaxis is a life-threatening condition in which a person has an acute allergic response to something in their environment. Being allergic to foods, such as shellfish, wheat, tomatoes, and nuts is thought to be the most common driver of anaphylaxis, although bug bites/stings and medications also caused reactions. Researchers have reported that 7.7% of the population had experienced anaphylaxis and, in some cases, this condition had resulted in death (Rance

· Goldberg, 2015). Furthermore, an estimated 200,000 people had been hospitalized from anaphylaxis each year with less than 100 of them dying from the condition (Cassels, 2016).

Anaphylaxis is a serious medical issue because of its rapid onset and the person who was reacting often does not realize that they were experiencing the condition. The patient needs to quickly recognize the symptoms when anaphylaxis sets in. Studies had shown that, of the people who had anaphylaxis, only 42% sought treatment for their symptoms within 15 minutes of onset, with many risking death by delaying treatment (Rance & Goldberg, 2015).

Most of the time, anaphylaxis had happened at home or in other contexts outside of the doctor’s office, such as in school or the workplace. Reports indicated that one out of every 13 children had a food allergy (Wilson, 2015) and the incidence of allergies among children had continued to rise over time (Petti, 2016). While food preparers attempted to prevent allergic reactions by not serving foods that cause anaphylaxis, cross-contamination could easily happen if the same utensil, counter tops, or dishes were used in the kitchen.

The Treatment

A Japanese chemist named Jokichi Takamine was the first person to identify adrenaline as its own chemical (Ramsey, 2016). Not long after his discovery, adrenaline began to be used for medical therapy and took on the name of epinephrine. Early on, epinephrine was used as an emergency medicine for the heart and lungs, and later it began to be used to treat asthma attacks and allergic reactions. When treating allergic reactions, epinephrine was injected into the thigh of the patient using a vial and syringe.

In the 1970s, a biomedical engineer named Sheldon Kaplan was tasked with creating a device that the military could give to soldiers to quickly inject the antidote into themselves when exposed to nerve gas during chemical warfare. After developing the auto-injector, called the ComboPen, Kaplan realized that his invention could be utilized by consumers to administer epinephrine to themselves during an emergency. Kaplan received no royalties for his invention, as he worked for a company called Survival Technology that owned the patent on the invention. Survival Technology was renamed Meridian Medical Technologies, and the company applied for a medical patent on Kaplan’s auto-injector, now called the EpiPen, in 1980. The drug and device to distribute the medication to the consumer (now known as EpiPen) was approved by the FDA in 1987 (Ramsey, 2016).

Meridian Medical Technologies introduced the EpiPen to the market, and in 1997, sold the exclusive marketing and distribution rights to Dey Pharma, a subsidiary of Merck (Carrier & Minniti III, 2016). Then, in 2007, Mylan acquired Merck’s generic pharmaceutical division, which included EpiPen as part of its product line.

For people with anaphylaxis, the doctor prescribed two epinephrine auto-injectors, such as the EpiPen, annually. Using an auto-injector proved to be better than the traditional vial and syringe approach because the device gave the exact dosage and the person who administered it was less likely to hit a nerve during insertion. Although some doctors and consumers reported that epinephrine could last much longer than a year, the expiration on the auto-injectors was limited to one year (Cassels, 2016). Furthermore, the doctor prescribed two injectors because patients had to always have two with them at one time. Sometimes it took a second dose of the epinephrine for the symptoms to subside (Rance & Goldberg, 2015). Thus, Mylan initially sold a single EpiPen but eventually sold them only in two-packs, because of the medical community’s recommendation for an individual to always carry two.

Mylan and the EpiPen

Initially, Mylan was not excited about acquiring the EpiPen brand; a single EpiPen was selling for $50 at the time. The company viewed EpiPen as an old brand that was not generating a significant amount of revenue. (Note, in 2007 EpiPen generated $200 million in revenue for Mylan.) The company considered selling off the brand but instead decided to try to revive EpiPen by investing in marketing. Bresch was the company’s chief lobbyist at the time, and she pitched a marketing plan that included the idea of targeting parents of children with allergies who were concerned about the safety of their children (Rubin, 2016). Moreover, the marketing campaign included an intense public awareness marketing effort to inform the public about the seriousness of child allergies (Koons & Langreth, 2015).

Bresch was the daughter of U. S. Senator Joe Manchin, a West Virginia Democrat, and Gayle Manchin, the head of the National Association of School Boards (Tuttle, 2016). She started out as a secretary at Mylan and worked her way up the corporate ladder to Chief Lobbyist and eventually CEO. Bresch was not new to controversy in her professional career. For example, when she was first appointed to CEO of Mylan, the official company press release stated that she had an MBA from West Virginia University (WVU). It was later revealed, through investigative

reporting, that Bresch had not completed her MBA at WVU and several university officials were complicit in creating grades for courses that she did not complete and falsifying her transcripts (Garde, 2016).

Also, in 2015 under Bresch’s leadership, Mylan purchased Abbott Laboratories and moved some of its operations overseas to buildings owned by Abbott in the Netherlands, in order obtain a more favorable tax rate for the company. Mylan, which was known for being a drug company that cared about its stakeholders and promoted corporate social responsibility, was criticized by the press and government officials (President Obama included) for taking advantage of this tax loophole (Garde, 2016, p. 4).

Thus, like other times in her professional career when Bresch faced adversity, she planned to fight for EpiPen, as she believed the brand was a winner. The goals of Bresch’s marketing plan were to increase awareness of anaphylaxis, improve preparedness for consumers, and expand access to treatment for those living with severe allergies (Willingham, 2016). The major point of emphasis for Mylan among these goals was to ensure access to epinephrine among as many consumers as possible. To achieve these goals, Mylan ramped up its advertising efforts that depicted children whose lives were saved because they had access to the 2-pack EpiPen when they had an allergic reaction (Mylan EpiPen TV commercial, n.d.). The message was clear: EpiPens were essential for the well-being of children with serious allergies.

Mylan also expanded its sales force and began to lobby Congress to pass a law requiring schools to keep EpiPens on hand for their students to use in an anaphylactic emergency (Hopkins, 2016). Advertising expenditures increased by 450%; the sales force was expanded by 40%; and lobbying efforts increased significantly (Hopkins, 2016; Lee, 2016; Tuttle, 2016). According to Bresch, the total amount Mylan spent on these marketing efforts exceeded $1 billion (CBS News, 2017).

One of the unique aspects of Mylan’s marketing campaign was its lobbying. Bresch was a former lobbyist and wanted to increase the education of legislators about anaphylaxis and epinephrine. Her mother, Gayle Manchin, also spearheaded an effort by the National Association of School Boards to encourage states to require that schools stock EpiPens in case there is an anaphylactic emergency among its students (Freeley & Langreth, 2016). Some thought this was a good idea because there had been a highly publicized case of a young girl dying from an anaphylactic reaction at school (Moisse, 2012).

Mylan’s lobbying, in conjunction with Gayle Manchin’s school board efforts, led to Congress passing the School Access to Emergency Epinephrine Act in November of 2013. Under this law, the Department of Health and Human Services prioritized funding preferences to states for asthma-treatment grants if they required that public schools stocked an emergency supply of EpiPens and developed a plan for training school personnel to administer the medication in case of an emergency (Rubin, 2016).

Upon passage of the law, Mylan created the EpiPen4Schools program in which the company would donate four EpiPens at no cost to a participating school each year. If a school chose to purchase additional EpiPens during the year, it could pay a “discounted price,” or it could obtain

a “deeper discount” if the school “certified that it would not purchase competitive products to EpiPen during the following 12 months” (Tuttle, 2016, p. 3). As part of its EpiPen4Schools program, Mylan donated more than 800,000 pens to over 70,000 schools across the whole United States (CBS News, 2017). The marketing campaign efforts were successful as well in increasing its product sales to more than schools. In 2014, Walt Disney agreed to stock EpiPens in Disney’s theme parks and on its cruise ships (Gough, 2014).

At the same time as Mylan was expanding its marketing efforts, the company had begun to also raise its prices on the EpiPen. Recall that in 2007, the price for an EpiPen was approximately $50 for one pen. By 2009, Mylan now sold only a two-pack, and the price was $124. By the end of 2012, the price for the two-pack had risen to $241. At the end of 2013, EpiPen’s price was $304, and in 2015 it was $461 (Herper, 2016). By 2016, the price for a two-pack of EpiPens was $608 (CBS News, 2017). The result was EpiPens had generated $200 million in 2007; sales read $1 billion by 2015 (Johnson & Ho, 2016).

The Consumer’s Reaction

As Mylan was steadily raising the price of EpiPens each year, many consumers did not initially notice the price increase, partially because the difference was absorbed by insurance companies. Furthermore, even though consumers may not have directly realized the price increase, it still was bearing out in the form of higher insurance premiums for employers, employees, and the end consumer (Herper, 2016).

Increasingly, however, people were moving to high-deductible insurance plans in which they were personally responsible for paying the full price for many medications, such as the EpiPen. In fact, approximately 25% of Americans were on high deductible plans in 2016, compared to just 4% of people in 2006 (Khazan, 2016). Also, the average deductible for a worker in 2016 was approximately $1300. Thus, to an increasing number of consumers, the cost of EpiPens appeared to be exorbitant.

Compounding the situation, most parents who purchased EpiPens had multiple sets for the car, home, camps, and other locations (such as a babysitter’s house, grandma’s house, or after-school daycare settings). In addition, some families had multiple children with allergies and thus needed, even more, sets of pens. Pens had to be replaced annually, due to expiration dates, and a person had to buy two at once (even if they have only used one pen in the set). The stress of the high prices even caused some parents to consider not purchasing the pens for their children (Parker-Pope & Peachman, 2016).

Concerned people created a petition in July 2016 complaining to Congress about the high cost of EpiPens to consumers (i.e.,

http://www.petition2congress.com/20720/stop-epipen-price-

gouging). People wondered how a hundred-year-old drug, epinephrine, could be so expensive. In fact, the epinephrine itself cost less than one dollar per milliliter. Also, in other countries, a two-pack of EpiPens cost much less. For example, the cost was $85 in France, $119 in the United Kingdom, and $131 in Canada (Cheeseman, 2016).

When asked about the $608 price tag of the two-pack of EpiPens in the United States, Bresch stated that $334 of that amount went to players within the channel of distribution, such as middlemen and pharmacy benefit managers. She stated that the company garnered $274 for each purchase and the net profit to Mylan was approximately $100 after accounting for expenses (CBS News, 2017).

The Competition (Or Lack Thereof)

Some consumers speculated that the cost of the auto-injector and the additional marketing expenses were not the only reason that Mylan charged an exorbitant amount for the two-pack of EpiPens. Mylan appeared to have a monopoly over the market, as there were virtually no competitors (Rubin, 2016). In 2012, for example, EpiPen was the dominant brand and enjoyed a 95% market share (Hopkins, 2016).

In the 1990s, there were zero competitors to the EpiPen. But in 2003, the first competitor entered the market, Twinject. Twinject was produced by various companies over the years and eventually was renamed to Andrenaclick. As of March of 2015, a company named Impax owned the right to market and distribute Andrenaclick. The price of Andrenaclick was much less than that of EpiPen, at around $142. However, Impax had not had much success in selling the product, which resulted in only a 5% market share (Carrier & Minniti III, 2016).

Doctors and consumers often preferred the EpiPen brand because Andrenaclick used a different technology for the administration of the epinephrine. The two devices worked differently, and the Adrenaclick injector was not automated. Once consumers learned how to use one of the two technologies, it was difficult to convince them to switch and take the time to learn a new method of administration. Additionally, doctors worried that while trying to learn a new system, user error would increase, potentially risking the life of the person having an anaphylactic reaction (Willingham, 2016).

Starting in January of 2013, another drug company, Sanofi, developed another competitor to the EpiPen, initially called the “e-cue.” The e-cue was later renamed the Auvi-Q and this technology utilized a recorded voice to instruct the user on how to inject the epinephrine (Carrier

· Minniti III, 2016). However, Sanofi voluntarily recalled all of its Auvi-Q injectors when the

Food and Drug Administration (FDA) determined that the product had “major deficiencies” because the auto-injector sometimes delivered an inaccurate dosage of the epinephrine to the person having the anaphylactic reaction (Rubin, 2016). Once the product was pulled from the channel of distribution, it was unclear when (if ever) the Auvi-Q would return to the marketplace.

Although not yet on the market, in 2009, Teva (another drug company) applied for FDA approval of yet another potential competitor to the EpiPen. However, soon after filing for approval, Mylan sued Teva for patent infringement. The two companies settled out of court and, “while the terms of the settlement were confidential, a Mylan Press release indicated that in the settlement Teva agreed to delay entering the market until June of 2015” (Carrier & Minniti III, 2016, p. 5). In 2011, another competitor, Sandoz Pharmaceuticals, also applied for FDA approval to enter the EpiPen market, and again, Mylan filed suit for patent infringement. As of

2016, Sandoz’s application with the FDA was “ongoing and the litigation was on hold” (Carrier

· Minniti III, 2016, p. 5). Thus, like the Auvi-Q, it was also unclear when (and if) Sandoz Pharmaceuticals would enter the market with their own version of the EpiPen.

The Right Thing?

Heather Bresch, Chief Executive Officer of Mylan, had completed her testimony to the House Oversight and Government Reform Committee. She staunchly defended Mylan’s actions and the pricing structure for EpiPen. Bresch explained that the company had increased access for consumers and made an important contribution to society by teaching people about life-threatening anaphylaxis. The company utilized a variety of marketing techniques to increase access and that, in turn, increased the price of EpiPens.

Furthermore, Bresch explained to the committee that, if anyone was to blame, it was a broken healthcare system in which consumers now had to pay very high deductibles and cover the full cost of medication out of their own pockets. The committee listened carefully to Bresch’s testimony and was going to issue a statement about their findings next month. Would the committee judge Mylan’s actions as acceptable? Did Bresch and the company act ethically? And what was the future of EpiPen?

QUESTIONS:

1)

Is the price increase justified as argued by Mylan, or is there a case to be made that this is price gouging?

PLEASE READ THE CASE STUDY, AND PREPARE THE PPT FOR THE ABOVE QUESTION.