Government is to blame for the skyrocketing price of EpiPens, not patents

By Brett Trout
August 29, 2016

Next Exit RealityThere has been much speculation as to the source of the recent spike in the price of EpiPens. EpiPens are auto-injecting syringes designed to deliver a specific amount of life-saving epinephrine to a person having a severe allergic reaction known as anaphylaxis. Without a rapid injection of epinephrine the person could die. In the United States alone, even with the availability of autoinjectors like the EpiPen, anaphylaxis causes approximately 500–1,000 deaths per year. While quick administration of epinephrine is imperative, injection of too much epinephrine into a person suffering from anaphylaxis may lead to dangerously high blood pressure, an uneven heartbeat, seizures, or other symptoms. With the injection of the appropriate amount of epinephrine and proper medical care however, the prognosis is good. While a dose of epinephrine costs mere pennies, autoinjectors like the EpiPen can cost hundreds of dollars. Autoinjectors take the guesswork out of epinephrine delivery, allowing a layperson to quickly deliver just the right amount of epinephrine, at just the right location.

Patents are Not the Problem

Since 2009, the average wholesale price of the EpiPen has increased by nearly 500%. Compounding the problem is epinephrine’s relatively short shelf life. Patients need to replace their EpiPens every year. While the EpiPen is protected by a patent, patents are not responsible for the recent dramatic price increase. The EpiPen sold for $57 back in 2007. Back then it was covered by the same patent that covers it now, but the price has jumped to more than $300 per autoinjector. Responsibility for the recent dramatic price increase in the price of the EpiPen lies with the government.

The Alternatives You Can’t Get

While the EpiPen is patented, there are several competitive autoinjectors. So why has Epipen’s maker, Mylan N.V., been able to increase the price of the EpiPen so dramatically? The problem is that the government is standing in the way of these competitive autoinjectors getting into the hands of the patients who need them. Adrenaclick is one alternative injector. In most states, pharmacies are legally allowed to offer patients cheaper generic equivalents of more expensive name brand drugs. That is not the case with EpiPens. If a doctor writes a prescription for an EpiPen, in most states the pharmacy is not allowed to offer patients the much cheaper Adrenaclick autoinjector. Teva Pharmaceutical Industries Ltd also has a competitive autoinjector. However, in March, the U.S. Food and Drug Administration (FDA) rejected Teva’s application to bring its competitive autoinjector to patients. But can’t companies just sell the inexpensive epinephrine in pre-filled syringes? Adamis Pharmaceuticals Corporation had hoped to offer pre-filled syringes of epinephrine which, while more difficult for a layperson to use than an EpiPen, would offer patients a much more affordable alternative. However, in June of this year the FDA rejected Adamis’ proposed pre-filled syringes, stating more data on patient usability and reliability would be acquired before Adamis can offer its inexpensive alternative to patients.

Pushing for Government Regulations That Benefit EpiPens

While the government has been busy shutting down EpiPen competitors, it has also been busy bolstering EpiPen sales. If you thought a regulatory monopoly was enough, think again. As a result of Mylan’s lobbying efforts, it was able to push through the School Access to Emergency Epinephrine Act in 2013, which provides money to states that require schools to stock epinephrine injectors. Back in 2010, the federal government changed its guidelines to begin recommending that epinephrine autoinjectors be sold in pairs. In response, Mylan went from selling one EpiPen at a time to selling EpiPens in packs of two. Mylan has also been engaged in funneling advertising dollars to snacksafely.com, which urges the FDA not designate epinephrine an “Over the Counter” (OTC) drug and which supports legislation that requires epinephrine be “stocked in ambulances and all places of public accommodation, like restaurants, cafeterias, malls, movie theaters – everywhere you currently find cardiac defibrillator AEDs.”

Rent-Seeking

Rent-seeking is increasing one’s own wealth without creating new wealth. Rent-seeking is often seen with companies spending money on lobbyists and giving money to politicians in an effort to impose governmental regulations on competitors, to increase the rent-seeker’s market share. Such efforts often result in a sub-optimal allocation of resources, punishing competitors and customers more than they benefit the rent-seeker. While Mylan, like most large pharmaceutical manufacturers, has spent millions of dollars on lobbyists and political campaign contributions, there is no evidence of any illegal quid pro quo. Mylan is simply acting in the interests of its shareholders. It is the system itself, not Mylan, that is corrupt.

The Solution

Patents are not the problem. Back in 2007 the patented EpiPen was selling for only $57. The reason the price of the EpiPen has nearly sextupled in price since 2007 has nothing to do with patents. Patents are the reason we have life-saving medical devices in the first place. Without the financial benefits afforded by patents companies would have no motivation to invest the millions of dollars necessary to develop new drugs and medical devices. The problem is a system of government that motivates companies to extract additional profits without providing anything in return. The solution to problematic governmental regulation is not more governmental regulation. Further restricting the free market by mandating the prices at which companies are allowed to sell their products will only result in even more regulatory inefficiencies. The solution is to move closer to a free market by removing governmental regulations and changing the system to reduce the massive financial motivations to rent-seek in the first place.

The Author

Brett Trout

Brett Trout is a registered patent attorney and nationally recognized speaker on Patent, Trademark and Internet legal issues. He is a member of the Iowa Academy of Trial Lawyers and President of the Blackstone Inn of Court. Brett is past President of the Iowa Intellectual Property Association and past Chair of the Iowa State Bar Association Technology Committee. Brett has authored several books including Cyberlaw, and is a co-author of Internet Law: The Complete Guide. For more information, or to contact Mr. Trout, please visit his firm website.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 23 Comments comments.

  1. Curious August 29, 2016 7:50 am

    The problem is a system of government that motivates companies to extract additional profits without providing anything in return.
    System of government? Are you suggesting that communism would have been the approach to take to prevent the massive increase in price?

    BTW — while I have read a multitude of articles on this topic, nowhere have I noticed that “patents” have been the blame of the price increase. Regardless, your rant against the “system of government” fails to focus on the true culprits: (i) doctors who don’t won’t prescribe the generic and (ii) Mylan.

    solution is to move closer to a free market by removing governmental regulations
    Don’t confuse a “free market” with an efficient market or fair market. Under a free market, nothing could prevent Mylan with colluding with other manufacturers to limit the supply. A life-saving drug is a classic example of an inelastic supply curve. Mylan can keep increasing the price of the drug because people have to have it. A truly “free market” is rife with uncompetitive behavior.

  2. Gene Quinn August 29, 2016 10:26 am

    Curious-

    You say: “Are you suggesting that communism would have been the approach to take to prevent the massive increase in price?”

    I can’t speak for Brett, but I’ve know him for years and I think I can safely say that he is no fan of communism. I believe the point he is making is that it is hardly surprising that a rational corporation would raise prices given the regulatory roadblocks the government is placing in front of competitors and alternative solutions. The patent isn’t the problem. This has been patented for years.

    You say: “Under a free market, nothing could prevent Mylan with colluding with other manufacturers to limit the supply.”

    That is very true, but not as easy to pull off as many expect. Even the oil cartel can’t seem to figure out how to collude effectively where there is no laws against such collusion.

    -Gene

  3. Appearance of ... August 29, 2016 12:27 pm

    The FDA is a big bottleneck. Many of these problems would go away if there was a streamlined FDA process authorizing importation and sale of foreign drugs under certain circumstances. For example, when supplies are scarce and/or when price increases are imposing a hardship on patients.

  4. Anna August 29, 2016 3:36 pm

    I couldn’t agree with this more. I’d only add that the patent protection on meds and devices should be changed so it starts upon FDA approval (vs. discovery). This would increase the amount of time a company could make a profit on a med and decrease the chances there would be such massive margins.

  5. Jerry Glasser August 29, 2016 5:09 pm

    I have had the opportunity to interact with Brett Trout on a few occasions over the past few years, and he presents a very detailed and well-written overview that should be taken seriously–not only because of the message, but also because the “messenger” (Brett) is a highly intelligent and experienced professional whose writings command respect. In an era in which all NPEs seem to merit being branded as “TROLLS” irrespective of actual circumstances, it is quite reasonable to draw-attention to the fact that patents are not the “culprits” responsible for the price increases of these medical devices. Thanks for taking the time to compose this super article, Brett!

  6. Been There August 29, 2016 7:46 pm

    Anna:

    The Patent Term Restoration Act grants up to 5 years of patent term extension for the period of time a patented drug is in the FDA approval process – up to 14 years from the product’s approval date. As for cost reductions with a longer patent term, the Congressional Budget Office has issued opinions on the subject and found to the contrary. Prices will not decrease with longer patent terms.

  7. Dr. Duru August 30, 2016 1:29 am

    I think some points here should be clarified.

    1. Like another commentor, I was surprised to see the strong claim that too much blame has been placed on patents. What’s the reference. I personally have seen the business and conventional media point the finger at marketing, lobbying, and aggressive market positioning. I think patents are well-recognized and accepted tool to help markets function where products require substantial R&D investment. However, in this case, medical professionals and politicians alike have argued that Mylan has spent precious little on development (it bought the device). Mylan’s sudden “magic” ability to sell a generic alongside its branded product speaks volumes to the pricing games the company is trying to play.
    2. Adrenaclick is indeed a viable alternative but the link provided did not substantiate the claim that pharmacies in many states do not allow the product. Instead, what the article states is that some states make it *easier* to get Adrenaclick without returning to your doctor for a new prescription. My impression of Adrenaclick is that its biggest issue is manufacturing sufficient supply to compete effectively. Hopefully that will change soon.
    3. Claiming the government is “shutting down competitors” sounds like an over-reach. What evidence is there that the FDA acted outside of medical/scientific concerns for the safety and/or the efficacy of the competing products that failed its tests? Sanofi voluntarily recalled its product AFTER approval. Teva still plans to get a generic to market. Adamis still has a chance to answer the FDA’s current concerns and could still have a viable product in the near future.
    4. The market is already working in some ways. Medically trained professionals are starting to reject the costly EpiPen in favor of the vastly cheaper syringe and vial solution. These folks regularly give injections for other maladies, no reason they cannot do the same for epinephrine. Only a matter of time before such rejection forces Mylan’s hand on pricing.
    5. This article suggests that Mylan has funneled ad dollars to curry favor Snacksafely.com. Yet, the site very clearly discloses Mylan as an advertiser. They do not seem to be hiding anything or favoring Mylan. Just today, the site produced an article reviewing the auto-injectors that could be coming to market. The site contains a lot of informative articles on research to fight allergies. It has articles helping people avoid exposure to allergens. Moreover, the link to Snacksafely.com provided here said nothing of any regulatory recommendations. It merely reported on the scathing letters from Senators Grassley and Klobuchar.

    Please correct me where I have misunderstood…

  8. Curious August 30, 2016 8:40 am

    That is very true, but not as easy to pull off as many expect. Even the oil cartel can’t seem to figure out how to collude effectively where there is no laws against such collusion.
    Not quite the same. Oil cartels involve a great multitude of actors and the transactions can be quite opaque. It is much easier to have 2 or 3 people of the same mind than 20 or 30.

    Some people have the idea that a “free market” is the panacea for all problems. A free market is a no-holds-barred cage match where only the strong survive. A “free market” incentivizes bad behavior because one can get away with it.

    it is quite reasonable to draw-attention to the fact that patents are not the “culprits” responsible for the price increases of these medical devices
    That’s nice and all, but I have not seen anybody argue (or imply) that it was patents that caused the price increase. What is the purpose of defending against an attack that hasn’t been made?

    This would increase the amount of time a company could make a profit on a med and decrease the chances there would be such massive margins.
    Interesting thought, but I doubt the prospect of a longer term would decrease the margins — it would just extend them out longer.

  9. Joe Allen August 30, 2016 11:01 am

    Unfortunately, the EpiPen example is being used as a pretext to go after patent rights as shown in this story from FiercePharma: http://www.fiercepharma.com/pharma/will-u-s-act-drug-prices-hillary-s-latest-tweet-raised-specter-and-investors-panicked. Note how towards the end it shifts from EpiPen to urging Hillary Clinton, if elected, to use the march in authority of the Bayh-Dole Act to force compulsory licensing for drugs deemed too expensive (even though NIH and Senators Bayh and Dole have said the law provides no such authority). There’s no Bayh-Dole link to EpiPen either but attempts to tap the current public outrage to push other agendas will still be made– and could be effective if not countered.

  10. Gene Quinn August 30, 2016 11:55 am

    Joe-

    The funny thing here is that compulsory licensing wouldn’t do a darn thing! The patent isn’t the problem. As Brett points out, several years ago while the patent was also in force the price was under $60. The problem is the FDA and various other government regulations. So Hillary Clinton and the march-in minions can completely destroy Bayh-Dole if they like and it won’t do anything to address this problem. They are, of course, only using this for their own agenda. Sickening.

    -Gene

  11. Titus Corleone August 30, 2016 12:14 pm

    Hmmmm, I think that saying, “Government is to blame” is a little broad… Heather Bresch is the CEO of Mylan Pharmaceuticals. They distribute the EpiPen. Heather’s daddy is Senator Joe Machin, and he setup a little deal for her: Donate $250,000 to the Clinton Foundation and daddy will insure “The Government” stifles Mylan’s competition and has the Justice Department turn a blind eye when she Jacks the price of EpiPens up by 400%. Anyone who doesn’t think there’s a quid pro quo between these Crony Capitalists, key Democrat senators, the current administration, and Hilary’s Clinton Foundation is delusional…

  12. Brett Trout August 30, 2016 6:55 pm

    Gene is correct. I am certainly not advocating for communism. If that is the impression I gave I apologize. I am advocating for less government intervention, not more. As I noted in the article, when there was market competition the price of EpiPens was $57.

    I am not sure what the “near future” is, but it is certainly not near enough for parents paying the current rent-seeking price for EpiPens.

    While Teva and Adamis are indeed attempting to bring competitive products to market, they are being held up by the government. That is what is keeping the price of the EpiPen high.

    Under a free market, the thing preventing Mylan from colluding with other manufacturers would be the fact that the underlying drug, epinephrine is in the public domain. Without government regulatory protection, no group of manufacturers would be able to significantly limit supply. Even if they tried to limit supply even a little, new producers would jump into the market and bring the price back down.

  13. Terry Wright August 31, 2016 9:37 am

    Interesting issue and discussion! As a casual observer, my perception from media reports is not that patents have been blamed for the high prices of EpiPens. Rather, it is a unique combination of expiring patents and lack of viable near term competition creating an environment (i.e. opportunity) where profiteering can be pursued. Many will argue that this is rationale behavior, and perhaps even a duty of corporate management to maximize profits for shareholders in a free market. The larger conversation revolves around balancing the desirable effects of the profit motive in promoting innovation with society’s interest in accessible health care. And, that is a philosophical/political debate….

  14. Anon August 31, 2016 12:44 pm

    For those who are insisting that no one is arguing that “patents are to blame,” you should check out “that other blog,” where the “usual suspects” ARE attempting to blame patents.

    (Of course, they are not being very successful at it – but the propaganda is there nonetheless)

  15. Curious August 31, 2016 12:47 pm

    Unfortunately, the EpiPen example is being used as a pretext to go after patent rights as shown in this story from FiercePharma
    I read the article, and again, I saw no link made by people attacking Mylan’s decision to raise prices and patents. Rather, the only link was made in the article itself (found in a pharma website and presumably written by a pro-pharma author who happens to be editor of the website).

    it shifts from EpiPen to urging Hillary Clinton, if elected, to use the march in authority of the Bayh-Dole Act to force compulsory licensing
    First, the author herself is the one who raises the issue of march-in rights (not any of the people quoted). Second, march-in rights are limited in scope (e.g., only applies to government funded technology) and march-in rights have yet to be exercised in the 35+ years of the Bayh-Dole Act. Given the long history of march-in rights not being exercised, I doubt this is something to be legitimately concerned about.

  16. Curious August 31, 2016 1:09 pm

    Hillary Clinton and the march-in minions can completely destroy Bayh-Dole if they like
    Destroy Bayh-Dole? March-in was written into Bayh-Dole. Moreover, as discussed above, march-in hasn’t been employed since this Act was passed in 1980. IMHO, you are making a mountain out of a molehill. Finally, we already have, in essence, compulsory licensing thanks to the Supreme Court (eBay Inc. v. MercExchange).

    They are, of course, only using this for their own agenda. Sickening.
    That’s what politicians do — ALL politicians. They take a current event and use it for their own purpose. Moreover, there is nothing wrong with using an event that supports the point you want to make. If you are anti-gun, then commenting on a school shooting supports your agenda. If you are anti-Muslim, then commenting on an attack on Americans by a Muslim supports your agenda. Don’t make it out to be worse than it is.

    Getting back to the issue at hand, the title of this article is “Government is to blame for the skyrocketing price of EpiPens, not patent.” Again, I haven’t seen any evidence that patents are being blamed. Second, the Government didn’t raise the price of EpiPens — Mylan did. As such, who is really to blame for the price increase? I think most people in this country figured it out correctly.

    While Teva and Adamis are indeed attempting to bring competitive products to market, they are being held up by the government. That is what is keeping the price of the EpiPen high.
    Let’s rephrase — Mylan doesn’t have any competition so they have no reason not to jack the price up as high as possible because of an inelastic demand curve associated with the product. Mylan is still the one jacking up the price — not the government. Since Dr. Duru seems to have a good handle on the facts, I’ll defer to his comments @7.

    the “usual suspects” ARE attempting to blame patents
    The “usual suspects” have an anti-patent agenda so anything bad that happens in this world must be tied to “junk” patents and “grafter” patent attorneys.

  17. Kuni August 31, 2016 1:27 pm

    Ya, umm, we used to have a “system to reduce the massive financial motivations to rent-seek in the first place.”

    It was called a top marginal tax rate of 90% (Top effective rate of around 76%.)

    And it worked just fine from the late 30’s, the 40’s, the 50’s, the 60’s, and the early 70’s until the economic terrorists who hate us for the freedoms that strong unions & a high marginal tax rates gives us used the oil embargo to launch their attacks.

  18. Gene Quinn August 31, 2016 2:14 pm

    Kuni-

    Obviously you need to seek medical attention for whatever condition it is that afflicts you. A 90% marginal tax rate did not work “just fine.” It is also correct to observe that when marginal rates decrease the government brings in more tax revenue, which seems counterintuitive I realize, but true. Even President Obama admitted that lower marginal rates increase government revenues during his 2008 campaign when he was asked. He admitted that he was going to raise taxes because it was fair despite the fact that would result in fewer dollars being collected.

    You really need to inform yourself.

    -Gene

  19. Kuni August 31, 2016 2:44 pm

    Gene –

    Other than it did in the late 30’s, the 40’s, the 50’s, the 60’s, and the early 70’s until the economic terrorists who hate us for the freedoms that strong unions & a high marginal tax rates gives us used the oil embargo to launch their attacks.

    But you already knew that Gene or you would not have responded with only ad hominem.

    P.S. Quoting a moderate Republican DINO is supposed to prove what again? I don’t recall the complaint being “government revenues” (even though those trying to disingenuously obfuscate with it conveniently pretend to forget inflation & population growth when revenues finally return to just the point they were at before trickle-down/supply-side Satanomics decimated them) but how to disincentivize rent seeking.

  20. Kuni August 31, 2016 2:53 pm

    Gene –

    I forgot to add that a living wage also reduces the need for “government revenues” because tax-payers are no longer required to keep companies like Wal-Mart’s modern day slaves alive with programs like SNAP & Medicare.

    There is only ONE policy that creates/maintains a strong sustainable national defense, a strong middle class and shared prosperity, and that policy is: Strong Unions, a very progressive tax system, and proper regulations vigorously enforced. Anything else is giving material aid to al-Qaeda vis-à-vis its goal to weaken America’s economy.

  21. Odd Duck August 31, 2016 2:55 pm

    It seems odd that Mr. Trout rails against “Rent Seekers”, without acknowledging that the whole patent system is exactly that: rent seeking. There’s good public policy basis underlying it, but you have to acknowledge it. Also, all of the FDA concerns seem legitimate. Mr. Trout doesn’t give an example or reason why the FDA actions are wrong, he just assumes we will agree that “FDA bad, free market good”.

    It seems to me that you can’t openly embrace the patent system and then disavow all other governmental regulation as an unnecessary barrier.

  22. Gene Quinn August 31, 2016 3:08 pm

    Odd Duck-

    Seems you are the one who has the understanding problem. The patent system about rent seeking, despite your protestations to the contrary.

    Rent seeking is when “an organization or an individual to obtain economic gain from others without reciprocating any benefits to society.” See
    Rent-Seeking Definition | Investopedia http://www.investopedia.com/terms/r/rentseeking.asp#ixzz4IwEwmMzA

    Inventors can keep inventions as trade secrets, but instead opt to disclose the invention to the public in exchange for a limited term of exclusive rights. So society benefits rather extraordinarily with a patent system. Furthermore, the patent system provides incentives that allow innovators to earn from their inventions, which allows them to in turn invent more, which likewise further benefits society.

    -Gene

  23. Nan November 23, 2016 6:53 pm

    Bottom line, the problem is greed and our inability to prevent corrupt people/entities from exploiting a system they control either monetarily or through legislative or regulatory power. It doesn’t really matter what laws you put in place or what regulations you create or dismantle; if there’s a “system,” people will find ways to game it. You see this tendency even in the most insignificant and meaningless of situations, such as online photo contests or crowd-sourcing sites, where the only gain may be the number of points accumulated.

    Thank you for writing such an informative and disturbing article. Looking forward to future reality checks and enlightenment.