Was The EpiPen Price Increase Ethical?
Recently there has been heated controversy and negative publicity over the rising costs of certain lifesaving drugs such as the Epipen. Different schools of thought have viewed pharmaceutical price increases with different perspectives; some justify the act while others vehemently oppose it on moral grounds. In the capitalist economy of the United States there are no laws that impose regulations on the amount of profit a pharmaceutical company can create so the legal system cannot be the sole determiner of whether certain business activities are morally right or wrong. There exist discrepancies between morality and legality in the United States and there are many extraneous factors to consider here. In this paper the author will bring forth evidence related to the Epipen price increase including prior history, regulatory and legal considerations and market consequences. The author will not convince the reader that the price increase of the Epipen was morally right or wrong but will offer enough evidence for the reader to make his or her own conclusion.
The Epipen Dilemma
The United States is a great country that was founded upon the principles of capitalism and the idea that anybody can be anything that they want. This is the land of the hustler, the land of the get rich or die trying attitude, the land of the get on the train or get left at the station lifestyle. If you want to start a business this country is arguably the best place to do it and the more money you have the easier the process becomes. In fact if you desired to enter the pharmaceutical industry the United States would be very lucrative because it is one of the only developed countries in the world that allows for direct to consumer advertising of pharmaceuticals. (“Keeping Watch Over Direct-to-Consumer Ads”, 2016) The Food and Drug Administration is supposed to protect consumers from unsafe medicines and unethical advertising, but is it possible for any government agency to be one hundred percent effective in the task at hand? Although it was legal for pharmaceutical company Mylan led by CEO Heather Bresch to increase prices of the Epipen it does not mean that the action created more good than harm or that they are free from legal repercussions in the future.
The cost of a single Epipen has soared from about $100 for a set in 2009 to over $600 in May of 2016. (Exhibit 1) The final price is dependent on insurance but the increase effected most consumers of the product by raising their yearly medical expenses and constricting their expendable income. (Parker-Pope & Peachman, 2016) Although this increase did not happen overnight although it did occur in large enough increments to spark controversy about pharmaceutical pricing and put financial burdens on some families who depend on the Epipen. Mylan, the producer of the Epipen, makes one billion dollars a year from sales of the Epipen alone.
Mylan dominated the market for life saving allergy medicine with little threat from competition since it bought the patent for the injecting device from Merck in 2007. In 2008 the Food and Drug Administration made a change to permit Epipens to be marketed to a wider audience than was previously allowed thus increasing Epipen sales. In 2010 the FDA revised its regulations to require that Epipens be sold in packages of two instead of one. A law was passed in 2013 requiring every school to stock Epipens that were not expired and being that the Epipen has a one year shelf life and an ever increasing cost this law created a large and rising new annual cost for schools. (Novak, 2016) These regulations and other factors such as celebrity endorsements created increased sales and immense profits for Mylan. It must be noted also that Mylan has recorded lobbying expenses of $1,240,000 in 2016, $1,550,000 in 2015 and similar amounts in previous years. (“Lobbying Spending Database – Mylan Inc, 2016 | OpenSecrets”, 2016) Mylan also spent 14 million dollars on television advertising campaigns for the Epipen during the price hike and increased spending on search engine advertising by 1,800% between April and May of 2016. (Snyder Bulik, 2016) One observer might comment that the organization made the right choices and deserved to dominate the market while another observer might comment that Mylan intentionally manipulated the market and regulatory bodies to achieve market dominance and then proceed to gouge prices.
Shortly after the Epipen price increase and resulting controversy in May of 2016, Heather Bresch, CEO of Mylan was called into a Congressional hearing in September to justify the price hike. During the hearing Bresch said that after expenses the company makes a hundred dollar profit on a pack of Epipens. She defended her 18.9 million dollar salary and said it was “in the middle” comparatively for her industry. The Congressional panel compared the actions of Mylan to those of Martin Shkreli’s companies that drastically increased the prices of other life saving drugs. (Bomey, 2016) There is not absolute proof that everything Bresch said was true and it is a common practice for companies to exaggerate expenses in order to create the appearance of lower profits.
If Mylan and Bresch thought they were off the hook they were wrong. Shortly after the Congressional hearing Mylan agreed to settle a suit with the Department of Justice for $465 million for overcharging the government for Epipens due to regulatory wording and legal maneuvering. Mylan was using a pay to delay strategy by sueing Teva Pharmaceuticals for making an alternative product while increasing the price of their product which happened to be the only one on the market and the federal court used the False Claims Act to force Mylan to settle the suit. (Willingham, 2016) There are two separate class action lawsuits mounting against Mylan because of the price increase and the seemingly arbitrary regulation mandating the sale of Epipens in packs of two. On top of this Mylan is being investigated by the New York Attorney General to see if the company has engaged in violations of antitrust laws. (Swetlitz, 2016) Mylan has already had to pay an enormous amount of money in legal expenses and settlements and their legal troubles are most likely just unfolding. The legal costs along with the terrible publicity that has ensued could potentially lead to bankruptcy and loss of market share for Mylan and the loss of a job or even legal consequences for Bresch and others.
We do not know what was said in the conversations among management and board members at Mylan before the price increase of the Epipen. We do not know whether or not the well paid corporate executives considered the potential negative impacts that this action could have on society. A person with a life threatening medical condition knows that there are drugs that can save their life if something goes wrong and needs to have access to them at all times. Mylan chose to increase the cost of a product that people and organizations are forced to buy whether it is for their own personal safety or because it is government mandated. This strategy will create immense profits for Mylan in the short term but the long term effects have already begun with negative publicity and tanking stock prices (Exhibit 2).
In the age of information consumers will take action to find alternatives when they become aware that they are paying more than what they think is fair. Makers of competing products have seen increased sales and interest as well as endorsements in the case of Consumer Reports endorsing the generic called Adrenaclick that costs as low as $140 at Walmart. Patients who are aware of the competitor can ask their doctor or pharmacist to give them the generic adrenaline injector instead of the name brand Epipen. The billions of dollars that Mylan has spent on advertising has made the Epipen a household name and in some states the only option for anti anaphylactic shock medicine available. (Skinner, 2016) For those who want to take a do it yourself approach, there are instructions online created by a doctor that show anyone how to make their own epinephrine injector in their own home for only $30. (Laufer, 2016) While alternatives exist they still may not be as effective as the trustworthy Epipen and some consumers may never trust their life in the hands of a generic brand. An unintended consequence that may occur as a result of the price increase is that a person could die because they either could not afford an Epipen or tried and failed to make one in his or her bathroom.
There is no question that this situation is an ethical dilemma in more ways than one. Being that there are several different ethical perspectives and principles that people abide by and an absence of critical information there is not one conclusion that can be reached with absolute certainty as to whether or not Mylan acted ethically. According to Aristotle’s theory on ethics, a person can be given an exemption from moral requirements if they can claim either ignorance or incapacity in a situation. (Aristotle. & Woods, 1982) We lack information such as what was said among executives and what their true motives and considerations were so we can only guess the answer to questions pertaining to ethics in this case.
An observer who frames ethics in a utilitarian perspective might consider Mylan’s actions justified if a greater good could be determined. Another observer with a duty based perspective might say that Mylan’s actions fell short of their duties to society as a maker of life saving drugs. In the future, the legal repercussions, negative publicity and increased interest in alternative generic drugs could force Mylan out of the epinephrine injector market and their short term lust for profits could bury the company. It will be interesting to see how the market and society continue to react to Mylan’s actions and one can only hope that other pharmaceutical companies will take notice and act so that they do not end up in a similar situation. Although some people may argue that capitalism creates evil, another perspective is that the market will respond to negative pressures and eventually force the “bad guys” out and this process is happening faster than ever before in the age of information.