Like an army giving up ground in hopes of winning the war, Mylan today announced that it will soon be marketing a generic EpiPen. Unlike offering deeper discounts through the copay assistance program, this step may actually create some short term savings for the healthcare system. Mylan and CEO Heather Bresch should be recognized for not simply thumbing their nose at Congress and the press and maintaining their profit maximization strategy for EpiPen. Perhaps they learned a lesson from Martin Shkreli.
Called authorized generics, generic products marketed by brand name companies are surprisingly common. Oftentimes, these products are released alongside a competitor’s generic product as a way to reduce incentives for competitors to enter the market and for brand name manufacturers to make additional profit as product margins fall. Mylan’s strategy is unique in that there isn’t a generic equivalent available. Other very similar epinephrine autoinjectors are approved by the FDA, but they are not generically substitutable in most states.
There are several aspects of this news that give me reason to be critical about Mylan’s move. First, this is a blatant admission of profiteering. Selling the product for $600 when they could have sold it at a profit for $300 admits that Mylan was wringing as many dollars out of patients with severe allergies as possible.
Second, Mylan was probably going to do this anyways. Authorized generics are a common strategy for brand name product manufacturers, and the scrutiny over the price of EpiPen likely just resulted in Mylan releasing the authorized generic earlier than previously planned. As such, long term savings are likely minimal.
Third, the copay assistance program will not include the authorized generic. Therefore, it will still be cheaper for many patients to buy the brand name EpiPen, even though the total cost to the system will be larger. For an explanation, see my previous post on copay cards. Insurers and pharmacy benefits managers wishing to stop patients from using copay cards would have to eliminate EpiPen from their list of approved drugs, called a formulary. Formulary exclusions have become more common recently and are effective tools for reducing drug costs, but given Mylan’s success in marketing EpiPen, patients may be upset that they can’t get the brand name.
Finally, although the half-off, $300 price tag sounds like a relative bargain, it’s still 3 times more than what EpiPen used to cost. Additionally, a 50% discount isn’t nearly as deep as the 80% discount that one usually sees when generic competition enters the market. This discounted price also may discourage other generic manufacturers from bringing alternatives to market, thus maintaining a higher generic cost for longer.
Mylan will Remain Dominant
Mylan does deserve some acknowledgement for taking this interesting step to reduce the cost of EpiPen. Although my inner cynic wonders if the move is more in response to investor worries than patient needs, this will reduce the some of the short term cost of EpiPen. Expect to see patient confusion and frustration, however, as formularies tighten to eliminate coverage of brand name EpiPen.
In the long term, this move may also serve to lengthen the amount of time Mylan remains dominant in the epinephrine autoinjector market by discouraging generic competition. Until there is robust competition, don’t expect the price of Mylan’s EpiPen generic to fall further. There’s also Mylan’s direct selling strategy, and it is yet to be seen how much volume may flow through that alternative channel.
In the battle over EpiPen prices, Mylan is far from defeated.