Day: September 3, 2016

The EpiPen tale illustrates how broadly greed is part of the pharma industry

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❝ The EpiPen pricing controversy is enough to trigger mental anaphylactic shock. First, Mylan raised the list price of EpiPens to more than $600 a pair. When protests predictably erupted, Chief Executive Officer Heather Bresch went on TV to say that if she cut the price of EpiPens, some people wouldn’t be able to get them anymore. Which is weird, because usually a lower price makes things easier to get. Then, on Aug. 29, Mylan announced it will sell a generic version of EpiPens at half the price — but keep selling the identical brand-name version at full price. Because, um, some people will be happy to spend twice as much as everyone else for their EpiPens?

❝ None of this, including the original price hike, makes sense if you think of brand-name pharmaceuticals as normal products whose prices are set by the forces of supply and demand. It does start to make sense if you picture drug pricing as a multisided, Machiavellian, long-running, high-stakes Game of Thrones involving drugmakers, insurance companies, pharmacies, pharmacy benefit managers, Congress, presidential candidates, and somewhere, down there in the smoke and dust, the children with life-threatening allergies who need to bring EpiPens to school this fall.

❝ This system has never worked well, but it’s working even less well now because of the profusion of high-deductible health insurance plans. Many ordinary Americans who haven’t reached their deductible limits are being exposed to high list prices that were intended to be no more than a starting point for negotiations between powerful institutional sellers and buyers. In other words, a price that was basically fake has become all too real. This is what Bresch argued in an interview on CNBC on Aug. 25: “It was never intended that a consumer, that the patients, would be paying list price, never. The system wasn’t built for that.”

❝ The EpiPen episode is a small part of the very big problem of high and rising drug prices. But even this small problem is kind of intractable. “Everyone in the system has built their economics and contracts on the list price that exists. It’s incredibly difficult to unwind that structure,” says Pembroke Consulting’s Adam Fein. “I can’t tell you there’s a simple solution. That’s why I’m not a politician.”

If we ever get serious about electing politicians who represent the needs of the great body of American citizens, ordinary folks, we might initiate a revision of the whole process. Put essential economics back into the loop. At least the threat of regulation and oversight might prompt industrywide action, reform.

Poisonally, I trust industry executives – especially the insurance industry – about as far as I can throw them uphill into a heavy wind. I think we’ll end up needing to reform the pharmaceutical industry as much as we need to continue to reform healthcare in general in this land.

Thanks, Barry Ritholtz

California is about to institute a radical climate policy — will they succeed and lead?

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❝ California has long prided itself on being a world leader on climate change — and with good reason…Within the United States, California is No. 1 in solar power and No. 3 in wind power. It boasts the third-lowest carbon dioxide emissions per capita behind New York and Vermont. Since 2000, the state has managed to shrink its overall carbon footprint slightly even as its population grew and economy boomed:

But now California is taking on a far, far more audacious task: trying to prove to the world that it’s possible — desirable, even — to pursue the really drastic emission cuts needed to stave off severe global warming.

❝ The state is already on track to nudge its greenhouse-gas emissions back down to 1990 levels by the year 2020. Then last week, after much fierce debate, the California Assembly and Senate passed a new bill, known as SB 32, that would go much further, mandating an additional 40 percent cut in emissions by 2030…

❝ The stakes are enormous: Policymakers everywhere will be watching to see if California can pull this off. Getting a 40 percent cut will require more than bucking up wind and solar and putting more electric cars on the road. It will mean reshaping virtually every facet of the state’s economy, from buildings to transportation to farming and beyond…

❝ So far, these programs have worked reasonably well. California is on pace to push its emissions back down to 1990 levels by 2020 — and the economy has thrived…

Anyone can put lofty climate goals on paper. The real question is whether California can undertake the specific actions needed to actually cut emissions.

California is essentially offering itself as a guinea pig in the world’s most important policy experiment. Everyone else will be watching and learning from the state’s successes and failures — whether it can develop the needed clean tech, whether it can spur innovation, whether it can control costs and navigate political opposition, whether it can rejigger the grid to accommodate enormous quantities of renewable power. No pressure!

Watch this space.