Medical laboratory managers are getting an important lesson in the power of price transparency to motivate patients to complain about arbitrarily high prices for healthcare services and products
By now, most clinical laboratory managers and pathologists know about the EpiPen pricing scandal. Simply said, it illustrates all the flaws and problems in the US healthcare system that make it possible for vendors and providers to raise prices arbitrarily and stick the bill on health insurers, employers, and patients.
However, it was one change in the healthcare system that caused the outrageous pricing strategy of EpiPen’s manufacturer, Mylan Inc., to become national news: price transparency for patients. That change is a result of the increased number of patients who must pay high deductibles and co-pays as a requirement of their health insurance plan. Thus, because tens of millions of patients were forced to pay for most or all of the cost of EpiPens, it was their complaints about the high cost of this device that brought the story to the attention of the national news media.
The Difference between Life and Death
Mylan (NASDAQ:MYL), an international pharmaceuticals company, came under scrutiny for drastically increasing the price for one of its products—the EpiPen. The EpiPen is a pen-like device that contains epinephrine, a synthetic version of adrenaline. When injected, blood vessels are constricted to alleviate the symptoms of anaphylaxis, a life-threatening reaction to a specific allergen.
Anaphylaxis occurs when the body detects an allergen threat and begins producing antibodies to alleviate the threat, which in turn generates anaphylaxis symptoms. The most common causes of this severe allergic reaction include food allergies, insect stings and bites, and medication and latex allergies. Symptoms of anaphylaxis include itching, swelling of lips and tongue, shortness of breath, coughing and wheezing, dizziness, hives, vomiting and nausea.
The EpiPen contains a premeasured dose of epinephrine. When injected into the thigh, the drug constricts blood vessels to increase blood pressure, relax the lungs, increase heart rate, and reduce hives and swelling.
Approximately 40-million Americans have severe allergic reactions that could lead to anaphylaxis, and having an EpiPen available could mean the difference between life and death.
In 2015, more than 3.6 million prescriptions for two-packs of EpiPens were filled in the United States. The shelf life for an EpiPen is approximately one year, and the manufacturer suggests replacing the devices once they exceed their expiration date.
Corporate Greed or a Broken Healthcare System?
Because the United States government does not regulate drug prices, Mylan is able to charge whatever price the company believes the market will bear. The recent price increase for the EpiPen, however, outraged many consumers who viewed the move as a perfect example of corporate greed. They launched a social media campaign urging Congress to intervene, and sent thousands of letters to lawmakers questioning the increase in the cost of the medication. The House Oversight Committee is now investigating Mylan about this situation.
In an article in CNN/Money, Mylan CEO, Heather Bresch, is quoted as blaming the increases on a lack of transparency in the US healthcare system. She described it as “broken” and stated that it “needs to be fixed.”
Bresch also stated that people are only now noticing the price of the medicine because so many are now on high-deductible health insurance plans, forcing them to pay more out-of-pocket costs. That is indeed a true fact and the patient outcry about price-gouging is what healthcare policymakers hoped would happen as more patients were required to pay substantial annual deductibles and co-pays. Such a consumer response is consistent with well-understood economic principles.
In the company press release, Bresch said, “We have been a long-term, committed partner to the allergy community and are taking immediate action to help ensure that everyone who needs an EpiPen auto-injector gets one. We recognize the significant burden on patients from continued, rising insurance premiums and being forced increasingly to pay the full list price for medicines at the pharmacy counter. Patients deserve increased price transparency and affordable care, particularly as the system shifts significant costs to them. However, price is only one part of the problem that we are addressing with today’s actions. All involved must also take steps to help meaningfully address the US healthcare crisis, and we are committed to do [sic] our part to drive change in collaboration with policymakers, payers, patients, and healthcare professionals.”
On August 29, Mylan also announced that it intends to launch the first generic version of the EpiPen by the end of the year. The authorized generic version will be offered at a price of $300 per two-pack, providing a 50% discount to consumers over the branded medicine. Its formulation and device operation will be identical to the EpiPen branded product.
Over the past nine years, Mylan has worked to heighten awareness of anaphylaxis and the benefits of the EpiPen. In that time, they also quietly succeeded in increasing the price of the drug by 400 percent. The price for a two-pack of EpiPens is now around $600. In 2009, the price for the same product was approximately $100. Keep in mind this fact: the quantity of epinephrine in an EpiPen costs less than $1.00 to manufacture!
As a result of the public backlash and outcry over the price increase, Mylan formulated a plan to assist some patients in obtaining the product at a reduced cost. The company now offers to certain patients a $300 savings card that can be used the same as cash. Consumers enrolled in high-deductible health plans, and people without insurance, may qualify for the savings cards.
Not Mylan’s First Rodeo Involving Price Increases
This is not the first time Mylan has come under pressure for price gouging. In 1998, the Federal Trade Commission (FTC) filed suit against the company for exorbitant price increases for certain medications. At the time, the cost of Lorazepam, a drug used to treat anxiety disorders, was tripled when Mylan entered into an exclusive agreement with the manufacturer of ingredients used in the drug. This agreement resulted in higher prices and a diminished supply of raw materials for Mylan’s competitors.
In 2000, the case was settled and Mylan was ordered to pay $147 million in fines and court costs and they consented to abstain from similar anticompetitive agreements in the future.
It is probable that Mylan will be the first of many companies to find themselves in a similar public relations predicament. The tens of millions of Americans who have high-deductible health insurance plans are now bearing more of the costs of their healthcare, including prescription drugs. Individuals may continue to be more vocal as they feel they are being swindled by big pharmaceutical companies.
Price transparency is becoming essential in the field of medicine. The costs associated with care, including medical laboratory tests and medicines, need to be at a price point where consumer patients see it as reasonable and fair for the value provided.