In the latest twist on the EpiPen saga, drug maker Mylan appears to have figured out a way to make more money on the product — while chopping the price in half.
Mylan’s new plan is to sell a generic version of its EpiPen directly to consumers, in what CEO Heather Bresch called an “extraordinary commercial response.” The new product, expected in the coming weeks, will be identical to EpiPen except for the label, and will sell for $300 for a two-pack — about half the cost of the EpiPen.
Here’s what we know about the move:
Why would Mylan do this?
The tactic might help quell a bit of the public furor over rising EpiPen costs.
It could also be a savvy business move.
Last week, Bresch took pains to explain that Mylan actually makes just $274 from each $608 pack of EpiPens it sells, because the product winds through a long line of middlemen before reaching the consumer.
Cutting out the middlemen to sell directly to patients means that Mylan can pocket the full $300 price — and may actually make as much as $26 more on the generic for every unit it sells, depending on the cost of shipping and manufacturing.
Even if Mylan does send some generics through the traditional supply chain, the move will help it box out competition from other generic drug makers. And the lower cost could boost sales, as patients who limited their EpiPen purchases because of the high cost might feel more comfortable buying another kit to have on hand in case of emergency.
Does it make a difference for patients?
Arguably.
It’ll definitely save money for patients without insurance, who had been paying the full price of about $600 for an EpiPen two-pack.
For those with insurance, it’s less clear. Last week, Mylan promised to issue $300 coupon cards to cut the cost of the EpiPen in half for patients with high-deductible insurance. Buying generic won’t save those patients any additional money, but it could save them some hassle, as they’ll no longer have to bother with the coupons.
Important note: The $300 coupons can’t be used for the generic.
How will this affect competition?
Here’s where it gets interesting.
Teva Pharmaceutical is expected to introduce an EpiPen generic of its own next year, which would carve into Mylan’s revenue. It might even be priced below the Mylan generic.
But Mylan might be able to thwart Teva’s efforts to compete, if it can build a loyal following of patients who like the convenience of buying its generic straight from the warehouse and having it shipped to their doorsteps.
Can you just launch a generic without FDA approval?
You can if it’s identical.
The FDA’s authorized generics program allows the owners of an approved drug to bypass the regulatory process once that drug goes off patent. Thus, Mylan can start selling generic EpiPen whenever it pleases.
Teva, on the other hand, has to prove to the FDA that its take on the auto-injector is just as effective, something the Israeli company failed to do earlier this year.
Does this mean Mylan’s in the clear?
Probably not. Bernstein analyst Ronny Gal expects Mylan will get some credit for its efforts, but not enough to change the narrative around its price increases.
Furthermore, lawmakers are far from appeased. Senator Richard Blumenthal (D-Conn.) said in a statement Monday that Mylan’s plan “raises as many questions as solutions — including why the price is still astronomically high.”
And Mylan’s answers to date don’t all add up.
“The company has gone from explaining that lowering the price is a very complicated thing, and just in a week they’ve taken three steps to do that,” Wells Fargo analyst David Maris said. “So we have to believe that either it’s difficult to do and these steps don’t accomplish that, or it’s easy to do and they’ve been sitting on these ideas for a while.”
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As a marketer who worked on EpiPen from 2005-2010, there is another very important advantage Mylan gains with a generic EpiPen vs. a generic from another manufacturer, and that is familiarity. The design of the device is what is patented. If the Teva auto-injector functions or looks too much like EpiPen, I suspect that will be a patent infringement. If it looks, feels or functions differently, it will be unsettling to parents who need to entrust school teachers, bus drivers, parents of friends, etc. to use the pen in an emergency. So even if the generic is cheaper, familiarity will be a powerful motivator to stick with EpiPen. We are talking about a life-saving treatment for unpredictable events here.
I think I heard or read somewhere that the actual cost of an EpiPen was a dollar. I realize that there are development costs that need to be recovered. How much does Heather make? Why do these middlemen even exist. Mylan is making too much money at $274. The middlemen absolutely have to go
Mylan licenses the device from a subsidiary of Pfizer. So they have costs that they cannot control that go beyond manufacturing. I’m not justifying their pricing, just saying that $1 isn’t realistic. Oh and BTW, they are a public for-profit company in a capitalist system. So I suspect the answer to questions of pricing are actually simple. They charge as much as they can get away with. I think they found that point now 🙂
It draws attention to the arbitrarily drug prices are set. Especially whan a FOREIGN firm buys a product whose medicine & delivery system was developed decades ago by taxpayer funded R&D can use the system to extort an outrageous price from those same taxpayers. And why those taxpayers continue to elect the corrupt legislators to retain that system. No other country on earth permits such corruption. We should stop allowing it too.
I was sure I had a generic for epipen a few years ago, so I called my pharmacy and had them check my records. They confirmed my belief and said that I had had a generic auto-inject, epinephrine made by Lineage. After a couple of years, Blue Cross wouldn’t pay for the generic because, they said, the generic was not approved by the FDA for bee stings! How is this possible? Isn’t ‘epinephren’ ‘epinephren?! Does Lineage still offer the generic?
What a racket!