Is Mylan really the bad guy? 4 thoughts from a leading healthcare strategist on the big picture of pharma price hikes

Since 2007, the price of EpiPens has increased by more than 400 percent, forcing some patients to pay as much as $700 for the medication. Mylan, the Canonsburg, Pa.-based company behind the life-saving medication, is facing large scrutiny from the media, consumers and politicians over the company's drug pricing practices, with many calling for stricter price controls in the drug industry.

The current list price for a two-pack of EpiPens is $608. Mylan CEO Heather Bresch claims the company only receives $274 per two-pack sold, or 45 percent. She says the remaining $334, or 55 percent, goes to pharmacy benefit managers, insurers, wholesalers and pharmacy retailers, according to CNBC. Ms. Bresch blames a flawed healthcare system for the price hikes, suggesting the situation stems from more complex issues than just corporate greed.

Rita E. Numerof, PhD, is the co-founder and president of Numerof, a St. Louis-based global healthcare management consulting firm based in St. Louis.

As a healthcare business strategist with more than 25 years of experience, Dr. Numerof helps organizations develop and execute new business models that can thrive amidst major market changes. She has consulted with all the major players from academic and community health systems, insurers, and Fortune 500 pharmaceutical, device and diagnostics companies.

Dr. Numerof spoke with Becker's Hospital Review about the controversy surrounding the price of EpiPens and why Mylan may not deserve all the backlash it's endured.

Note: Responses have been lightly edited for length and clarity.

Question: What was your initial reaction to the controversy surrounding the cost of EpiPens?

Dr. Rita Numerof: The fact that there was a controversy about it didn't surprise me at all. We've known for years that there are pharma products where the link between price and value has been broken. The broader concern that I have is that the general message has pointed to price controls as the answer. I don't think that is a wise move.

Q: Do you see Mylan's move to expand its drug discount program or offer a generic version of EpiPens as a steps in the right direction? Or simply anotheralternative strategiesy to keep prices high in the long run?

RN: I think it's an excellent decision on their part and a good strategy. Most people don't understand that pharmaceutical manufacturers are in a somewhat unique category compared to manufacturers of other products. When a pharmaceutical company successfully invents a product and gets it approved, they get a period of exclusivity to earn money back. For every product brought to market, there are a lot of other products that did not flourish. TSo there's a lot of risk involved in bringing new drugs to market.

At the end of the exclusivity period, other manufacturers are allowed to copy the product and compete with the original branded version. In the case of EpiPen, there have been several generic competitors that have come out, but for various reasons all failed, so EpiPen has had a commanding market share. Recognizing that it could be vulnerable at any point in time and knowing that buyers are constrained because no other options exist, Mylan made an "excessive" price hike to try to capture as much revenue as possible during this period. That's something companies in almost any other industry do all the time.

However, given the nature of the pharmaceutical industry, this type of pricing creates more of an uproar. The price hike is perceived as immoral and insensitive. So the introduction of a generic alternative is a way to maintain that pricing for some customers by segmenting the market.

Q: Do you think this media attention and the demand for more economic evidence and clinical value will make drug companies more accountable for their pricing strategies?

RN: I think that we have many pressures are moving us in the direction of more evidence that is focused on economic and clinical value. Any media attention on that is a good thing. The reality is that the FDA is requiring different kinds of evidence than what was required five or six years ago. I expect that will continue to change. The FDA is moving away from a sole focus on randomized controlled trials and now including evidence of how drugs will perform in the real world. I'm a strong proponent of transparency and tying payment to outcomes.

Q: In your opinion, what changes do you think need to be made in the pharmaceutical industry to prevent these types of price hikes?

RN: I think a balanced view on this is very important. It's not about putting in price controls; it's about stimulating good competition. The pharmaceutical industry needs a more market-sensitive regulatory apparatus in the FDA, which will encourage more competition and result in better regulation and pricing balance. We need a pricing apparatus that will encourage other manufacturers to move into difficult spaces. We need to rely on the moral compass of business leadership to keep the excesses of capitalism in check. I think if we don't do that, we'll end up with more pressure of government controls that will undermine the market and innovation of new drugs.

 

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