After last week’s surge of criticism, pharmaceutical company Mylan said Monday it will offer a generic EpiPen for half the price of its branded one. The price of EpiPens, which are used for treating severe allergic reactions, has increased by more than 400 percent over the past ten years. Mylan acquired the product in 1997, when two pens were $94. Today, a two-pack costs as much as $608.

Last week, Hillary Clinton urged Mylan to lower its prices, as kids with food and insect allergies are about to go back to school and are dependent on EpiPens in case of a severe allergy reaction. The pens have a syringe that is filled with the hormone epinephrine, but it expires after a year. Many families keep several pens handy to have at school and at home.

The new generic pen would cost $300 for a pack of two. After the media attention, Mylan also said it will expand its programs that help people pay for the pens, as well as offer $300 copay cards–however these would only be eligible for the branded version of the pens. The assistance programs could be used for both.

The CEO of Mylan, Heather Bresch, defended the constantly rising prices last week, saying that the company only gets $274 from each pair of pens sold. A large chunk of money goes to insurance companies, pharmacies, and others. She also claimed that “no one is more frustrated” than her over the price increase.

Mylan’s CEO responds to EpiPen price criticism: https://t.co/DHDt1bJ5WH pic.twitter.com/g92QatlexI

— Forbes (@Forbes) August 28, 2016

Social media has been in uproar over the company’s greed, arguing that it puts lives in danger. Sarah Jessica Parker announced on Thursday that she’s quitting as Mylan’s spokesperson. Her son has a life-threatening peanut allergy.

Sarah Jessica Parker quits as Mylan spokesperson over EpiPen price hike https://t.co/ZwiydpYkkI

— TIME.com (@TIME) August 26, 2016

Heather Bresch is the daughter of Senator Joe Manchin (D-West Virginia) and reportedly got her job at Mylan because of that relationship in 1992. She moved the company’s headquarters to the Netherlands last year, which entailed a lower tax rate.

Last week, Senator Amy Klobuchar (D-Minnesota), whose daughter is dependent on EpiPens, demanded a hearing over the dramatic price hike.

Emma Von Zeipel

Emma Von Zeipel is a staff writer at Law Street Media. She is originally from one of the islands of Stockholm, Sweden. After working for Democratic Voice of Burma in Thailand, she ended up in New York City. She has a BA in journalism from Stockholm University and is passionate about human rights, good books, horses, and European chocolate. Contact Emma at EVonZeipel@LawStreetMedia.com.

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A new drug called Sovaldi, developed by Gilead Sciences Inc., is now available on the market that cures between 80-90% of users from Hepatitis C Virus (HVC). This is a ground-breaking development in medicine, as approximately 3.2 million Americans currently suffer from Chronic HVC according to the Center for Disease Control. This new drug is administered as a twelve week treatment and costs $84,000 which is considerably lower than traditional forms of treatment at $300,000. But here is the problem: according to University researcher Andrew Hill, Sovaldi only costs $150 to $250 per treatment. How can Gilead charge such an unreasonable price for a life saving drug?

Bringing A Drug to the Market

Before we draw any conclusions about the reasonability of charging $84,000 for Sovaldi, we must understand the process of how drug manufacturers bring a new product to the market. Our government attempts to guarantee protection for consumers from unsafe products through regulatory oversight, which means that not any product can simply be sold in stores. A new product must complete a twelve step process of human and animal phase-testing, facility inspection, drug labeling, application review, and review meetings.  This process can easily cost a billion dollars, meaning that the initial investment for drug development is steep one.

This high-cost initial investment creates a problem, namely, it can discourage innovation. In order to cover the start-up costs in production phase, a company needs to charge an inflated initial price  to make up for the original high-cost investment. The problem is that another company could easily replicate the drug and make a knock-off product to sell at a much lower price, as they don’t need to worry about making up initial investments. This hiccup, of stifled innovation, has been dealt with by government intervention and protection. In order to incentivize medicinal innovation, the government provides extended patent protection, preventing companies from being undercut by sales replicate drugs at a cheaper price. Such patents can give companies an effective monopoly for quite some time.

The Ethical Concern

Although this form of patent protection ensures continued innovation, there is some concern regarding possible abuse of these safeguards. When we revisit the question regarding the reasonability of Gilead charging $84,000 for the treatment, it is understandable that they must charge an initially high price. However, what happens when these costs have been covered? Mike LaBossiere reports that “when asked if Gilead would reduce the cost once it recovered its money, the vice president [Gregg Alton] of the company said, ‘that’s very unlikely that we would do that. I appreciate the thought.” Alton defends this position by claiming that, “those who are bold and go out and innovate like this and take the risk — there needs to be more of a reward on that. Otherwise, it would be very difficult for people to make that investment.”

Alton’s claim seems reasonable, yet Gilead’s opposition to lowering the price of Solvadi, after covering investment costs,  raises serious concerns regarding public welfare. It appears that a company like Gilead might be exploiting this fact when they develop the “fair price” at which to sell the drug.

The Solution of State-Capitalism

Government patent protection of new medical products should be coupled with temporary partial government ownership of the company as a stockholder. Essentially, for a certain period of time, drug companies would function as a public sector undertaking. This would have two benefits. First, the drug company still functions as a profit based competitive initiative keeping the reward system to spark risky business ventures like developing a new drug. Second, having the government as a large shareholder would help combat extreme price inflation that prevents accessible medicine for the severely and terminally-ill.

Some may be hesitant about the idea of state capitalism, but we shouldn’t be too hasty to throw it out as a possible solution. In fact, government owned businesses are some of the most successful ones in the world. The Economist reports,

State capitalism can also claim some of the world’s most powerful companies. [Such as] China Mobile is a mobile-phone goliath with 600m customers. Saudi Basic Industries Corporation is one of the world’s most profitable chemical companies. Russia’s Sberbank is Europe’s third-largest bank by market capitalisation. Dubai Ports is the world’s third-largest ports operator. The airline Emirates is growing at 20% a year.

If it is the case that government owned businesses have the ability to stimulate innovation, prove successful, and protect the public from exploitation, we may want to consider them as a possibility in cases like drug and medicine development.

 [TPM] [FDA] [NPR] [The Economist]

Bo Donoghue

Bo Donoghue is a student at The George Washington University. Contact Bo at staff@LawStreetMedia.com.

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The Food and Drug Administration’s recent decision to curb the use of prescribed painkillers has quickly become a topic of huge media speculation. A debate focusing on the pros and cons of this verdict has been sparked between the drug-selling companies, health providers and the Centers for Disease Control and Prevention (CDC).  While few health providers argue that this might have serious consequences on patients suffering from acute pain, others believe that this is an attempt to reduce the increasing number of deaths caused due to the abuse of household painkillers.

According to the CDC, painkiller overdose death rates have more than tripled since the 1990. In 2009, abuse of prescription painkillers was the major reason behind all 475,000 emergency department visits across the nation.  Hydrocodone-the main ingredient behind most household painkillers included in the variety of opioid narcotics, is seen as the dominant cause for the increasing number of deaths.  In the past, hydrocodone was classified as a low-risk drug that permitted doctors to prescribe it over phone, and allowed patients to use it for a period of six months on a single prescription. Although, these rules eased the access to the drug and pushed the sales to new heights, it additionally fueled the widespread dependence and related deaths.

Last week, almost after a decade and a half of careful cross-examination, the FDA took a step forward to reduce the harmful effects of the drug. The new proposal eliminates the conveniences of prescribing painkilling drug. It reclassifies Hydrocodone under Schedule II drugs, thus bar phone-in prescriptions and place a 90-day limit on refills.  Most opponents of FDA’s decision complain that this will force ailing patients to schedule more frequent visits to the doctors, which might prove to be burdensome for most middle-income families. In response to this, FDA reaffirms that a change in regulations for Hydrocodone containing drug supply was absolutely necessary as it kills more people than any other forms of narcotics.

Controlling substance abuse has always posed a challenge for the FDA, and extension of this malpractice into the prescribed drug sector; could lead to results much more uglier than ever imagined. In my personal opinion, the FDA’s recent drug restrictions should be applauded as this initiative could save lives and mitigate the overall narcotic abuse rates. Hydrocodone supplying companies could experience an initial down surge in sale revenue, but that should not lead them to undermine the dangers of selling the drug.  It is time for drug-selling giants to realize and act on their social responsibilities.

[CDC]

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Featured image courtesy of [Eric Norris via Flickr]

Tanzoom Ahmed

Tanzoom Ahmed is a graduate of George Mason University with a Master of Public Policy. Contact Tanzoom at staff@LawStreetMedia.com.

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