Epipen price gouging: Sowing, reaping, and a senator’s daughter

The Pediatric Insider

© 2016 Roy Benaroch, MD

Parents, docs, and pundits are fuming. A life-saving, critical medication, used mostly in children, has become just about unaffordable for thousands of families. The Evil Drug Company Mylan has jacked up the price to over $500 over the last several years – this despite no increase in their costs. Congresspeeps, presidential candidates, and the ever-wise Facebook community all agree: Something must be done!

This isn’t the only example of weirdly-high prices for certain older drugs over the last few years. The system seems to be broken. To understand how best to fix it, it would be a good idea to go over just how the system was supposed to work.

After a drug is invented and tested, the company that developed it gets to sell it exclusively, under patent, for a set number of years. During that time the drug is only available as one “Brand Name”. The patent system is in place to reward the company for their innovation, allowing them to recoup their development costs, and make a profit. That encourages them to develop more new drugs, to make more money and to continue to bring new drugs into the marketplace. This part of the system certainly isn’t perfect – you can argue over just how many years drug companies should get exclusive rights to sell the drug they developed, and drug companies seem to be pouring more of their money into marketing and lobbying than into researching and developing new drugs. But the current problem really isn’t about new drugs or new patents.

What’s broken is the step that happens after the drug exclusivity patent expires. That’s when “generic” companies should be able to bring competing products to market. These are the same chemical, but packaged and sold by a different company. When multiple drug companies step in and produce generics, the market price of the drug falls precipitously. Many older drugs that now have multiple generic versions (including many antibiotics, statins, blood pressure, pain, and psychiatric meds) now have generics that are almost “free” – given away by grocery and pharmacy chains as loss-leaders. Yes, you can get a free supply of some antibiotics at Publix. That’s the marketplace at work. When it works, it works.

Except when it doesn’t. That price fall depends on generic companies being able to cheaply and easily bring the generic versions to market. Epinephrine, the medication in Epipen, has been around for decades, and it’s not under a patent. But regulatory issues have thwarted competitors from selling competing versions. One competitor, Auvi-Q, was recalled after a few dozen cases of wrong doses being dispensed by the device (to my knowledge no one was harmed by any of those errors.) In February, 2016 the FDA rejected Teva’s application for a generic epinephrine injector, and in June they delayed another company’s application, calling for expanded patient trials and more studies.

And it’s not just FDA regulations that gum up generic availability. Sometimes, drug manufacturers “pay off” generic makers to delay the introduction of generic medicines. These and other legal anti-competitive shenanigans create a marketplace that’s far from fair, preventing competition from driving down prices.

There is a very similar auto-injecting epinephrine device available, and it’s far cheaper: Adrenaclick. But the packaging and delivery system is different, so it’s not allowed to be freely generically substituted for an Epipen. If you want it, you have to have your prescriber specify that brand.

So: with no generic substitutions in sight, Mylan could freely increase their price. The same thing happens if there’s only one gas station in town, or only one health insurer in a local market. As we all learned from the board game, Monopolies are good for the monopoly, but bad for everyone else.

There’s more to the Epipen story. Mylan has been quietly jacking up the price for years, but no one really noticed until now. Until recently the list prices of medications were largely hidden from consumers. If you had health insurance, they paid the price, and you paid just a copay or whatever. Who cared what the “real” price was? Now that many of us have high deductible plans, those prices become important. Hiding the true cost of things from consumers, in the long run, doesn’t make for a fair or efficient marketplace.

And: you might imagine, with all of this price-gouging talk, you’d hear calls for someone’s head on a platter, in front of congress. Not this time. Mylan’s CEO is Heather Bresch, daughter of Senator Joe Manchin (D-West Virginia.)

The situation with the Epipen will wash out soon. The manufacturer has announced new cost-savings programs, and will almost certainly be lowering the list price shortly. But the regulatory framework that led to this disaster is still there, and until that’s addressed we’re going to be seeing more examples of crazy-priced drugs (and other medical services) soon.

The government pokes me in the eye. Again.

Remember HIPAA? That’s the “Health Insurance Portability And Accountability Act” of 1996, a fabulously convoluted and incomprehensible pile of stink that was supposed to make health information more private, while at the same time allowing individuals to more easily change health insurance plans. After numerous revisions, clarifications, and doodling in the margins, we’ve got a system in place that:

• Costs billions
• Prevents doctors, hospitals, and labs from communicating
• and creates (1.5 million links!) a Byzantine, sprawling industry of consultants, lawyers, and bureaucrats to monitor enforcement and create new rules. None of this improves health care in any way.

From the patient’s perspective, the only tangible impact of this monster is a steady stream of unreadable, paper-wasting lawyer-scribble in the form of “privacy notices.” Oh, and you get to sign a few more forms when you go to the doctor.

From my perspective, HIPAA is  a hugely expensive waste of time squatting uninvited between me and my patients, a hideous, stinking uninvited guest that only gets bigger and more stinking every year. (As an example—the current Economic Recovery Act includes tweaks that requires providers to track every disclosure of health information that’s been used for any purpose—for three years. See, that will help with the economic recovery by employing even more administrative pygmies and consultant-weasels. Not that I am bitter.)

But get this: HIPAA might just have been a preview for a whole new set of rules and regulations being foisted on the healthcare industry by the nameless rule-makers. You haven’t heard much about this—yet—but get ready for the “Identity Theft Red Flags Rule.” Since it lacks a snappy abbreviation like HIPAA, let’s call it the “Screwing Physicians and Empowering Weasels” Act, or SPEW for short.

The rule was announced in 2007 by the Federal Trade Commission (FTC) as a way to protect consumers against identity theft when dealing with financial institutions and creditors. Fair enough, those businesses handle zillions of dollars in increasingly complex transactions, and identity theft is a genuine threat. But after the rule was announced, and the period of public comment ended, the FTC told physician groups that it was going to consider the term “creditor” in a very broad sense, including any business that defers payment. That’s right—since doctors will allow you to leave without paying, while we wait for payment from your insurance company, that makes us a creditor. No matter that we don’t charge interest, or that we’re only extending “credit” to cover a medical bill for  a few weeks. We get the same rules and oversight and paperwork as the megabanks, though of course no bail-out money to pay for all of the consultants, employees, and time its going to take to do this. Since no one guessed that SPEW would apply to physicians and hospitals, we had no chance to review the rules or suggest any modifications to make them work in our industry.

The SPEW rules are so vague that no one knows what we are really supposed to do—a boon to the consultants and lawyers who leaped so happily into HIPAA-chummed waters a few years back, and are salivating over a new opportunity to make sure that even less of your health care dollar is actually spent on health care. The rule requires health businesses like mine to develop and conduct an identity risk assessment, followed by implementation of an identity theft program to identify, detect, and respond to potential risks. We’ve got to have a plan in place stating how we’ll respond to alerts of potential misuse of identifying information. What, exactly, does all of this mean? I found one example I could understand: The FTC suggests, among other steps, that to comply with this rule we should check photo ID at every encounter. I hope your baby has a driver’s license.

SPEW, like HIPAA, is a hugely misguided effort by your government run amok. It will add layers of complexity and cost to every medical encounter, further burdening physicians and distracting us from providing medical care. It’s one more completely unnecessary poke in the eye, one more straw on the back, and one more nail in the coffin for the few physicians left who still enjoy practicing medicine.