Instructions Read the Discussion Case: Mylan Pharmaceuticals and the EpiPen found in Chapter 2 of the textbook and discuss the following question. Based on the Mylan Pharmaceuticals and the

Mylan, Inc. is a U.S. pharmaceutical company that manufactures the EpiPen, an easy-to-use auto-injection medical device. EpiPen delivers the proper dosage of epinephrine, a drug that safely and effectively counteracts anaphylaxis, a severe allergic reaction that can close a person’s breathing passages and cause death. EpiPen is especially effective because the proper dosage can be quickly delivered by anyone—the persons themselves, co-workers, teachers, by standers—by simply placing the device against the skin and pushing a button. Because of the ease of use, EpiPens are especially popular for treating severe allergies in children.

The device itself is simple and inexpensive, costing at most a few dollars to manufacture. The drug epinephrine is also inexpensive, costing less than $1 per dose. But, epinephrine degrades over time, so medical professionals recommend that unused devices be replaced at least once a year. It is not uncommon for someone susceptible to anaphylaxis to keep several on hand at work, school, or home. Because the EpiPen has been in use and proven its effectiveness for over forty years, the initial investment required to develop the product has long since been recovered.

Mylan purchased rights to the EpiPen in 2007. At the time, EpiPens sold for under $60 each, and annual sales approached $200 million. Mylan invested to

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improve the design and manufacturing process, but the overall product did not change significantly. Mylan also invested heavily in marketing the product, including an advertising campaign aimed at increasing public awareness of anaphylaxis and lobbying governments to require institutions like schools to keep EpiPens on hand for emergencies and to protect those institutions from liability for using EpiPens in emergencies. By 2016, it was estimated that EpiPen accounted for over $1.5 billion in revenues for Mylan.

In the following years, a number of public and private decisions lead to major increases in the costs to consumers. Because a portion of anaphylaxis cases require a second dose of epinephrine, medical guidelines were changed in 2010 to recommend that patients always have access to two doses. Soon after this recommendation, Mylan began selling EpiPens only in packages of two, effectively doubling the price to consumers. For a variety of reasons, including regulatory roadblocks, business decisions, and patent protections, competitors have had a difficult time entering and remaining on the market. By 2016, when few competitors remained and Mylan had a 90 percent share of the market, the price for a two-pack of EpiPens had risen to over $600. It was estimated that in 2016, sales of EpiPen produced close to $1.5 billion in revenues. During this same period, Mylan’s CEO’s pay rose from $2.3 to $19 million annually. In 2016, former CEO Robert Coury was reported to have received over $90 million in compensation from Mylan.

In 2016, Mylan came under serious public criticism for increasing the price of EpiPen. Some critics pointed out that Mylan’s CEO, Heather Bresch, was the daughter of former West Virginia governor and present U.S. Senator Joe Manchin. These critics claimed that her political connections helped pave the way for governmental regulations, including increased risk warnings for anaphylaxis, encouragement to schools to stock EpiPens, and regulations to make EpiPens as publicly available as defibrillators. In October 2016, Bresch was called to testify before the U.S. Congress to defend Mylan’s actions.

The criticisms of Mylan can be grouped into three general categories. First, some critics saw the massive profits and excessive executive compensation as another example of out of control corporate and personal greed. Second, others saw Mylan as an example of systemic failures in health care policy and economics that prevent society from providing adequate health care. Finally, some critics charged that Mylan’s actions violate a number of basic ethical principles.

The Mylan hearings took place during a period when affordable health care was at the center of a national political debate. This also occurred at the time when another pharmaceutical company executive, Martin Shkreli of Turning Pharmaceuticals, was in the news for raising the price of one of its drugs from $13 to $750 per pill. Shkreli, who the press had named “Pharma-Bro” for his condescending attitude toward public criticism, had also been called to testify before Congress, but he refused on the grounds of self-incrimination. During Bresch’s testimony to the U.S. House Oversight and Government Reform Committee, Congressman John Duncan told her that “The greed is astounding, it’s sickening and disgusting. I’m a very conservative, pro-business Republican, but I am really sickened by what I heard today and by what I’ve read before about this situation. In my opinion, no one can really earn or deserve $19 million a year.”

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The national debate about affordable health care provided the context for much of the broader, systemic criticism of Mylan. The national debate on affordable health care focused on the relative strengths and weaknesses of free markets and government regulation in providing adequate health care. Those who argued for a greater role for free markets, most often Republicans, saw Mylan as a case study for what happens when there is a lack of competition and the market gets controlled by a near monopoly. Mylan was able to exploit this unfair competitive advantage and raise prices almost without consequences. These critics also pointed out that government regulation of the market contributed much to the problem. Governmental actions, such as requiring institutions and schools to stock EpiPens and creating regulatory standards that created a barrier for competitors to enter the market, created an economic environment in which Mylan’s exploitation could flourish. As a result, the public was denied access to the important good of affordable health care.

Those who supported greater governmental involvement in the health care system, most often Democrats, saw Mylan as a case study of what happens when important public goods such as health care are left to the decisions of profit-seeking corporations. These critics argued that Mylan used its political influence, lobbing activities, and marketing campaign to create artificial markets, eliminate competition, and deny the poorest citizens access to needed health care. From this perspective, a managed health care system in which private businesses are regulated by public bodies would provide better overall health care. In particular, they argued that only government regulation could prevent companies from price gouging on prescription drugs and other health care products that consumers need.

Finally, many criticisms of Mylan appealed to fundamental ethical principles and values. These critics pointed out that citizens should have a basic right to health care and that this need should not be sacrificed for the profit of private businesses. Other critics pointed out that the burden of high drug prices fell disproportionately on the poor, and that a basic principle of fairness and equality is violated by a system in which health care is distributed according to the ability to pay. Still other critics raised questions about the justice of a system in which executives earned tens of millions of dollars a year, while poor, sick people were denied access to the product that generated this wealth. These critics argued that Mylan had a duty to provide the EpiPens at an affordable price.

DISCUSSION QUESTIONS

What judgment would you make about Mylan? Did they do anything ethically wrong in their pricing of the EpiPen?

Do you think that a pharmaceutical company should be allowed to charge whatever price the market will pay for prescription drugs? Should prescription drugs be treated differently than any other consumer product?

Congressman Duncan used the word “greed” when describing Mylan’s actions. What is the difference between greed and simply the desire for more money? Is greed always bad? Why or why not?

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