Mylan Tries Again to Quell Pricing Outrage by Offering Generic EpiPen

August 30, 2016

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Source: The New York Times

In its latest move to quell outrage over its price increases, the maker of the EpiPen has resorted to an unusual tactic — introducing a generic version of its own product.

The company, Mylan, said on Monday that the generic EpiPen would be identical to the existing product, which is used to treat severe allergic reactions. But it will have a wholesale list price of $300 for a pack of two, half the price of the brand-name EpiPen.

The raging debate over EpiPen pricing has offered a surprisingly wide window into the complicated world of prescription drug pricing, in which powerful drug companies, pharmacy benefit managers, insurers and federal health programs all play major roles. However, the system remains opaque.

Last week, the company announced steps to increase the financial assistance for the branded EpiPen, for both commercially insured and uninsured patients. Those measures, however, did not stem the public furor, in part because the company kept the list price the same. So now, the company will essentially sell the same product under two names at two price points, in competition with each other.

The new move did not mollify critics, either. Some noted that even at $300, the generic would still be triple the price of the EpiPen in 2007, when Mylan acquired the product and began steadily raising its price. The increases have accelerated in recent years. Even the generic, expected to be available in several weeks, should provide a nice profit to Mylan because its manufacturing costs are believed to be far less than $300.

Several consumer advocacy groups, unhappy with Mylan’s handling of the drug’s pricing, said that on Tuesday they would deliver petitions signed by over 600,000 people to the company’s American corporate headquarters in Canonsburg, Pa. In addition, the House Committee on Oversight and Government Reform said that it had started an investigation and had asked the company for information about the product.

Robert Weissman, president of the consumer group Public Citizen, said Mylan should just cut the price across the board.

“The weirdness of a generic drug company offering a generic version of its own branded but off-patent product is a signal that something is wrong,” he said in a statement. “In short, today’s announcement is just one more convoluted mechanism to avoid plain talk, admit to price gouging and just cut the price of EpiPen.”

While brand-name drug companies sometimes start selling so-called authorized generic versions of their own products, it is usually to undercut an outside generic competitor. In this case, Mylan faces no immediate generic threat.

So why is it acting? And why did it not announce the move last week with the other measures?

The company suggested in its news release that its action required an agreement from its manufacturing partner, Pfizer. It also has said that merely reducing the list price of the drug would not necessarily lower the prices for patients, because the out-of-pocket costs are set by pharmacy benefit managers and insurers. The generic should mean savings for insurers and federal health programs like Medicare and Medicaid, in addition to some patients.

“Because of the complexity and opaqueness of today’s branded pharmaceutical supply chain and the increased shifting of costs to patients as a result of high-deductible health plans, we determined that bypassing the brand system in this case and offering an additional alternative was the best option,” Heather Bresch, chief executive of Mylan, said in a statement.

Mylan has repeatedly pointed to high-deductible health plans, which leave patients with more out-of-pocket costs, as the main reason patients are suddenly noticing higher prices for EpiPens.

Adam J. Fein, president of Pembroke Consulting, who studies the drug distribution industry, said that if Mylan had simply lowered the price it would have risked angering all parties in the distribution network, including pharmacy benefit managers, wholesalers and pharmacies, which take a piece of the total amount spent on the drug.

Introducing a generic “is a way to do it without making enemies with a bunch of Fortune 25 companies who control your fate,” he said.

Still, by selling both a generic and a branded version of the drug, one Mylan product is now battling another for sales.

Ronny Gal, an analyst at Sanford C. Bernstein & Company, estimated in a note on Monday that Mylan’s overall revenue per epinephrine auto-injector prescription would be reduced by around 25 percent, to about $280, because of the introduction of the generic.

A couple of factors are expected to limit that revenue decline. The term EpiPen is so familiar that many doctors write prescriptions for it by name, rather than for a generic epinephrine auto-injector. While pharmacists in many states will be able to substitute the generic version, some are almost sure to sell the branded version instead, leaving Mylan with higher revenue.

In addition, Mr. Fein said, insurers might have negotiated deals with Mylan that make the brand-name version less expensive for them than the generic. “It’s going to depend on your particular insurance plan, and the kind of deal they have negotiated,” he said.

Consumers might also have incentives to use the brand-name drug in some cases because most of them would have no co-payments if they use a savings card being offered by Mylan. They might face a co-payment, albeit a relatively small one, for the generic product.

Despite the lower revenue from releasing the generic, Mr. Gal said the move could be good for Mylan shareholders by easing the downward pressure on the company’s stock. After falling more than 10 percent last week, Mylan shares were up slightly on Monday.

It is not uncommon for brand-name companies to introduce a generic version of their own product — known as an authorized generic, in part to try to retain some sales once generic competition arrives. But the generic industry and some other critics say the practice undermines the economics of the generic business and ultimately can lead to higher costs for consumers and insurers.

A study by the Federal Trade Commission several years ago found that some generic manufacturers agreed to delay the introduction of their generic product by years if the brand-name company promised not to introduce an authorized generic.

Mylan settled litigation with Teva in 2012 allowing Teva to introduce a generic EpiPen in 2015. It is not known if part of that agreement was for Mylan to withhold any authorized generic. If not, then Mylan might have been planning to introduce this authorized generic when Teva introduced its own product. But Teva disclosed earlier this year that its application had been rejected by the Food and Drug Administration.

Still, it might be only a matter of time before Mylan faces new generic or nongeneric competition. Other companies, sensing opportunities, are looking at developing less expensive products that, like EpiPen, provide a rapid injection of epinephrine to counter anaphylaxis that can occur from a bee sting, peanut allergy or other cause.

And pressure is mounting on the F.D.A. to be more accommodating in allowing alternatives on the market.

Epinephrine, the drug, is already generic. The challenge has been developing an easy-to-use auto-injector that can reliably deliver the right amount of drug when used by the patient or caregiver under emergency circumstances. Sanofi removed a nongeneric competitor to EpiPen, called Auvi-Q, from the market last year because of dosing problems.

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