❝ 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