Mylan, Epipen Prices, And How Obamacare Killed The Co-Pay In Favor Of Through-The-Nose Pay
People are screaming that the Epipen, which keeps people from dying from an allergic reaction, now costs $600 a pop.
Dr. Rich writes at Ricochet:
The utter complexity of pharmaceutical pricing is destined to create some surprises, perhaps even to the actors involved. I don't pretend to understand the nuances of drug pricing. But drug prices in the US are determined by complex interactions between drug companies, the government, insurance companies and pharmacy benefit managers (PBMs). To get a drug on the formularies of the two great PBMs (Express Scripts and CVS Caremark), drug companies are forced to offer both discounts and rebates to the PBMs. Because of the discounts and rebates it must offer (which, in other industries, might be called a bribe), Mylan says it actually gets "only" about $275 of the $600 list price.In the old days there would not have been much blowback from such artificially high list prices. This is because in the old days (say, 2014), most insured consumers paid only a co-pay for their drugs. But, thanks to the new-style insurance plans brought to us by Obamacare, consumers no longer have a co-pay. They have a high-deductible instead, which now averages over $1000 per year per individual. So many more customers are being hit with the full $600 for their Epipens. From the deer-in-the-headlights look displayed by Sen. Manchin's daughter, it seems likely to me that the CEO of Mylan was as surprised by this realization as was Ryan Lochte when he found out that even Brazil has lots of video cameras.
Now, thanks to the "Affordable" Care Act, you could say I have it all: High monthly rate, high deductible, and all sorts of stuff I won't need, like pediatric dental care for the children I'll never have.
So, As I've said before about my formerly very affordable care: With Obamacare, I still have health care; I just can't afford to use it.
Getting back to the Epipen, don't blame capitalism for the price:
Monopolies cause high prices, especially if you create a great demand for the limited product. Other companies have developed auto-injectors for epinephrine, but for one reason or another the FDA has not seen fit to approve them (or, having approved one, subsequently took it off the market). It is possible that by limiting competition, the FDA has furthered the goal of public safety -- I have no access to the data, so cannot say. What is a sure thing, however, is that the FDA has maintained a clear path for Mylan to behave as a monopoly, and that Mylan has acted (as companies are wont to do) according to the incentives thus provided.
He also makes a point that occurred to me:
The Epipen is a delivery system that makes administering epinephrine more convenient in an emergency. But the life-saving can still take place without the Epipen. I am an Old Fart, and during most of my practice life there was no Epipen. People who had life-threatening allergies carried epinephrine syringes with them that they pre-filled themselves. Most people can be trained to do this in about 5 minutes. The whole system used to cost about $1 a dose. (With inflation, that might now be as high as $5 a dose.)If I had a life-threatening allergy I would rather have an Epipen, but again, that's a matter of convenience, not a matter of life and death. Is the added convenience worth $600? Maybe, maybe not. If most people were to answer "maybe not," and if Mylan did not have a monopoly, and if the media and their go-to docs would place things into better perspective, odds are that the price of the Epipen would come down.
High deductible isn't supposed to be so bad, but it used to have a correspondingly low monthly rate. That's the tradeoff; pick a deductible that you feel you can afford based on the savings per month. That way in a catastrophic event, the deductible gets eaten up quickly and everything is covered. Then the "government" gets involved and starts mandating more and more things be covered. That drives up the monthly cost, so you wind up with high deductible and high cost. Fewer mandated coverages, purchase across state lines would help. There would need to be some kind of high risk pool (like in states with mandated auto insurance) so the cost for some folks is still bearable, but that would give the government less control over you.
Cost of drugs is difficult, lots of government in the way bringing something new to market, money that is partly recovered because of patents, but you're never guaranteed doctors will use the drug, so you wind up offering incentives. Generics can help offset the cost to the consumer, but can't have them until the patents run out and no guarantee the generic will be identical to the brand name.
mer at September 1, 2016 5:49 AM
There's a lot of crookedness in the pharma industry, for sure. But it also provides products that have greatly increased our quality of life over the last century, making it possible for us to live longer and be healthier over our lifespan. It's instructive to look at the set of motivations and incentives. I have to take a drug that is very expensive -- $450 per month for the first six months of the year until my deductible is met, then a $120/month copay for the rest of the year.
Before Obamacare, Express Scripts put a lot of pressure on doctors to prescribe generics, often by refusing to put brand names on its formulary. This went as far as demanding that doctors substitute other drugs if the preferred drug wasn't available in a generic. Now, generic drugs aren't always the answer, but they certainly do have a cost advantage, so it is always beneficial for the entity who is paying to at least ask about generics.
So when I started getting hit with these huge drug bills, I did just that: I asked the doctor about generics. Guess what? Express Scripts will only authorize the brand name drug! I can't get the generic even if I am willing to pay for it completely out of my pocket, because the doctor is not permitted to prescribe it.
This is where we are. Express Scripts demands the brand name because they get a kickback from the drug manufacturer. The higher cost of the drug is no skin off their nose because I'm paying the difference. The manufacturer makes more money, Express Scripts makes more money, and they both get brownie points from Washington for "bending the cost curve" -- towards me. And going outside the system isn't a realistic option, because the government and the industry have taken measures to ensure that people who do that pay the highest prices of all. And they still have to have the damned insurance because Obamacare made that the law. The system ensures that self-pay has all of the disadvantages and none of the advantages.
Cousin Dave at September 1, 2016 6:12 AM
That's what's gone -- the tradeoff of high deductible for low monthly rate. I got in early -- in my early 20s (I'm 52 now) -- to an HMO, and I thought I was doing the prudent, responsible thing by not waiting till I was older. (And it was the right thing -- I didn't want to possibly burden my parents or the public if something went terribly wrong with me or I got in an accident.)
Then, suddenly, all those irresponsible people who'd developed some problem got to get in and be paid for by people like me. Plus they mandated all this care I will never use.
I eat low carb and exercise and barely use my healthcare; only really to get (generic, el cheapo) ADHD drugs from a psychiatrist. It's sort of pointless to go in for other stuff, because I can't afford any of it. Colonoscopy? Over $700. I take the poop test and hope. On that note, frankly, I'm probably better off, because all medical care has risk and the poop test (mail-in thingie) had, when I looked a pretty good rate of catching anything wrong with you.
Amy Alkon at September 1, 2016 6:17 AM
The way I recall it, you could get coverage for preexisting conditions, but the insurance company would have an initial period where you would pay out of pocket; basically they wanted to collect a few months of payments before they started paying anything. If one keeps in mind that Insurance companies are a business, a policy like that makes perfect sense, forces a person to have skin in the game. Otherwise you get exactly what you have now: no insurance until needed, get it, others pay, you get fixed, drop the insurance until next time.
I think "medical care" worked a lot better when Drs would take chickens and cows in lieu of cash.
mer at September 1, 2016 7:50 AM
The entire Mylan Epi-Pen thing has been a scandal from the beginning.
Heather Bresch, CEO of Mylan, got her job when her father asked the then-CEO, a family friend, to hire her. She started in the basement and worked her way up to CEO. She received an Executive MBA from West Virginia University without completing the required coursework. She had originally claimed to have an MBA from WVU. Several resignations of university officials stemmed from that scandal and her EMBA was later rescinded.
Her father is the former governor of West Virginia and current US senator for the state.
The so-called "Epi-Pen Law," the School Access to Emergency Epinephrine Act was signed in 2013. The reauthorization bill for the FAA included a provision requiring planes to carry epinephrine auto-injectors on board. While the first was sponsored by Dick Durbin, a Democrat from Illinois, and the second was sponsored by a Republican, I'm sure the CEO having a father who was a US senator did not hurt the chances for passage of these bills.
Mylan's board at that time, knew she took credit for an MBA she did not earn. When you hire an ethically-challenged CEO, you cannot then act surprised when your company is embroiled in a scandal.
Conan the Grammarian at September 1, 2016 9:19 AM
"With Obamacare, I still have health care; I just can't afford to use it."
Count yourself lucky on that. I found that with Obamacare I was paying for insurance I could never use. I've since dropped out. Paying a grand a month and being unable to see any doctors didn't make much sense.
Ben at September 1, 2016 9:46 AM
If you can buy insurance for something that has already happened, it is not insurance, but welfare.
Obamacare is sorta like buying home owner's insurance AFTER your house burns down and expect coverage
Nick at September 1, 2016 9:50 AM
Because of the EpiPen scandal, a lot of liberals are ramping up their complaints about Big Pharma. But these are the same people who want mandatory vaccinations.c
Fayd at September 1, 2016 10:13 AM
"Because of the EpiPen scandal, a lot of liberals are ramping up their complaints about Big Pharma."
At this point it's a blue-on-blue fight. There is every motivation, for everyone involved, to game the system. There is no motivation to be an honest broker because it's a dishonest system.
Cousin Dave at September 1, 2016 11:28 AM
what's been skipped, and by that Dr. too, is that a child can use an epipen jr. themselves, where their parent or school prolly won't let them use a needle/epinep.
Many schools no longer have nurses, and I dunno if the office secretary has clearance to use a needle either...
Adults are on their own, it's kids where this becomes complicated.
Having had anaphylaxis myself, dunno if I'da been steady enough to use a needle... one of my eyes swole shut immediately and I was having trouble breathing, so...
This is the full gonzo of perverse incentives, regardless.
SwissArmyD at September 1, 2016 11:55 AM
Amy, You don't have health care, you have heath insurance. Those 2 things are completely different and the more people who understand that the more likely we will get GOOD change.
Denise at September 1, 2016 12:06 PM
Yes, essentially: The government decided that the way to deal with expensive medical care was to force everyone to buy expensive medical insurance that doesn't cover the expensive medical care.
Pirate Jo at September 1, 2016 2:30 PM
ObamaCare was a solution in search of a problem.
Americans were concerned about the rising cost to their health insurance and increasingly limited access to healthcare. So ObamaCare came along and raised the price of insurance while limited access to healthcare.
Conan the Grammarian at September 2, 2016 6:53 AM
What, let ordinary people handle syringes? You know something horrible will happen – or at least the right-thinking people will imagine something horrible, and that's what counts.
Anton Sherwood at September 6, 2016 1:00 AM
The Epipen costs 76 chf here... and we have universal forced insurance purchase here.
NicoleK at September 8, 2016 6:12 AM
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