Mylan’s CEO has defended the US pricing strategy for EpiPen before an oversight committee in Congress, as a new report highlights the significant increase in Medicare Part D spend on the device since 2007.
Implications | Medicare spending on the EpiPen increased 1,151% between 2007 and 2014 mainly due to price increases during that time frame. Mylan’s CEO is facing tough questions by the US House Committee on Oversight and Government Reform regarding the firm’s pricing strategy for the auto-injector. |
Outlook | The substantial rise in EpiPen expenditure by Medicare Part D could add even more publicity to the issue as taxpayers and legislators continue to question the firm’s controversial pricing strategy. However, IHS Markit Life Sciences does not foresee a significant immediate impact on the US pharmaceutical market in light of these debates. |
Mylan (Netherlands)’s EpiPen (epinephrine) auto-injector has been thrust into the spotlight recently as public and legislator concern regarding significant price increases for the drug have resulted in the company’s CEO, Heather Bresch, being called to testify in front of an oversight committee (see United States: 9 September 2016: US Senate investigation, consumer lawsuits increase pressure over EpiPen pricing).
Surprisingly, recent analysis published by US non-governmental organisation the Kaiser Family Foundation has noted a substantial increase in public expenditure for EpiPen by the Medicare Part D programme. In 2007, the programme spent an estimated USD7.0 million on the auto-injector, yet this annual expenditure rose 1,151% by 2014 to USD87.9 million. It is worthwhile to note, however, that manufacturers typically provide rebates to Medicare plans ranging between 10% and 14%, and although this was not taken into account in the initial analysis that relied on retail claims data, it is estimated that the actual spend in 2007 was around USD6.4 million, rising to USD75.3 million in 2014.
The main driver behind this sharp increase was attributed to price rises reported for the drug within that timeframe, although there was also a notable 164% increase in Medicare beneficiaries utilising the device – up to 211,000 – in 2014. The US FDA labelling urges caution for use of the epinephrine injection in senior adults as the drug could result in certain side-effects, such as increased blood pressure or irregular heartbeat, which could be detrimental for individuals with heart disease, according to the source.
Bresch testifies in Congress
The US House Committee on Oversight and Government Reform raised several concerns in a heated exchange with Mylan’s CEO at a hearing on 21 September, citing the almost 5,000% price increase of the drug since 2007, as well as estimates of nearly 1,500 deaths annually due to lack of access to the epinephrine injection, and the firm’s large control of the market – Mylan holds a 94% market share in the US – as issues that need to be addressed, among others. Bresch defended the pricing strategy by noting that once the company’s rebates and costs were taken into account, the net profit from a USD608 EpiPen two-pack was around USD100.
Outlook and implications
Medicare provides healthcare coverage to nearly 40 million elderly and certain disabled individuals in the US, and the substantial rise in EpiPen expenditure could add even more publicity to the issue as taxpayers and legislators continue to question the firm’s controversial pricing strategy.
The price of EpiPen, used to treat severe allergic reactions, has increased from USD94 in January 2007 to USD608 in 2016. Mylan has already taken steps to try to ease public concern, predominantly by cutting out-of-pocket costs to patients, and launching a generic version of the drug priced at half the cost of the original, around USD300 (see United States: 31 August 2016: Mylan to launch cut-price generic version of EpiPen and United States: 26 August 2016: Mylan cuts out-of-pocket cost of EpiPen in US).
There has been increased scrutiny in the US in recent years as the unregulated price of drugs places increasing strain on both public and private drug spend. Although there is no formal process to regulate the price of drugs in the US, health insurers and pharmacy benefit managers can place significant pressure on manufacturers to provide significant discounts. In fact, Bresch noted that EpiPen discounts to health insurers averaged around USD338 for each USD608 two-pack of the auto-injector.
IHS Markit does not foresee a significant impact on the US pharmaceutical market in light of these debates. However, if the Democratic presidential candidate Hillary Clinton is elected in the November election, her proposed plan to curb drug prices, specifically allowing Medicare to negotiate drug prices, would have a larger impact on the industry. Nevertheless, there are a lot of obstacles to be overcome before this highly contested plan can become a reality (see United States: 5 September 2016: US presidential candidate Clinton proposes new plan to keep prices for long-standing drugs under control).