Epi Pen Case Analysis - All Busn Classes must submit this PDF

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EpiPens Mylan Pharmaceutical (NASDAQ: MYL) was founded in 1961 in West Virginia as a healthcare company that has become global where they produce, manufacture, advertise, and sell medicine and medical products. Mylan’s products, around 750 of them, can be found in more than 160 countries and territories to wholesalers, pharmacies, and drugstores (Mylan). In the last 14 years, Mylan’s annual revenue has increased by more than 500%, but from 2015 to 2016 net income has decreased by 50% even with an increase in prices especially in the EpiPen (Mylan, NASDAQ). According to Mylan, their slogan is to have a “Better Health for a Better World”. Mylan explains that their mission to revolutionize health care by working together globally and provide high quality medicine. They highlight that one of their principles is to “Do what’s right, not what’s easy”. In this case study, we are focusing on the legitimacy and necessity of raising the prices of the EpiPen-a medical device to quickly inject adrenaline in the case of an allergic reaction (Darden Business Publishing University of Virginia). The CEO of Mylan, Heather Bresch, has lost the trust of the public and needs to rebuild her credibility. It is important for Bresch to realize she represents a company whose mission is to do what is morally right while making the world a better place. There were no signs of dramatic changes to the cost of adrenaline used for the EpiPen or manufacturing cost for the device (Darden Business Publishing University of Virginia). So, a complete and thorough explanation of the expenses of this product needs to be expressed to the public and congress, who are now questioning this dramatic price increase of 350% over the last five years- now costing $600 (Darden Business Publishing University of Virginia). This increase made stock prices and even their net income decrease. Mylan’s income statement shows that from 2014 to 2016 their net income decreased from $929,400 to $480,000 while sales revenue still increased (NASDAQ).

Bresch blames two things: a “broken” drug system, where insurance has high deductible limits where those need to be paid before the insurance covers the cost of medicine or medical service, and the entire pharmaceutical supply chain, where pharmacy managers are taking a cut out of the medications. Bresch explains that she hopes that Trump’s administration will help address these issues (Mangan). As one can see the increase is not benefitting Mylan’s company since expenses are increasing and thus there must hold some truth in her reasoning behind the increase. If all drug companies are under fire for their high prices and if one cave they all have to which they do not technically need to since the companies, none the less, are still growing and customers are still purchasing (Kesselheim, Avorn, Sarpatwari). Even if expenses are increasing the total revenue still continues to grow for Mylan (NASDAQ). Additionally, it is important to note how the EpiPen was once able to cost $57 and is now $500 (Paton, Naomi). The public needs this device and there isn’t much competition making the company look like their making monopolylike prices. Eric Schneiderman, a New York attorney, raised concerned about Mylan violating antitrust laws, laws put in place to ensure competition and avoid monopolies in order to benefit consumers (Pierson). Bresch should use this opportunity and scandal to reveal and thoroughly explain what is happening because people are still confused, scared, and angry about this dramatic price difference. It is important moving forward, Bresch remains transparent about her increases so the company doesn’t get backlash from this and also show how these increases are not just from the EpiPen but other medical drugs, device, and services (Kesselheim, Avorn, Sarpatwari). Bresch notes that around fifty percent of Mylan’s revenue happens past the borders of the United States (Mangan). Mylan wants to aid people around the world to have access to the quality medicine that Mylan produces and provides (Mylan). I understand these differentiated

prices from country to country. I however do not think they should be such dramatic differences, but one needs to understand each country’s purchasing power parity. Purchasing power explains the exchange rate in comparison to buying normal goods in each country. One should note that the United States purchasing power is not only higher but almost 800% higher than France (MecoMeter). This help explains why Mylan prices differently to help other countries and bring these medicines to them. Additionally, Mylan needs to recognize that these price differentiations makes the company, one that started in America, look like they do not care about Americans. This drug is needed in schools in America, so it is important to try to make those needs more accessible (Pierson). If they were forced to make prices more reasonable, then Mylan would lose their diverse portfolio and also they would risk not being able to provide their medicines globally to actually benefit these people. A lot of government agencies are actually prohibited from intervening or negotiating with the prices of pharmaceutical drugs. While in other countries, the government is allowed to set a price ceiling after evaluating the drugs and its costs (Ramsey). Even though, raising prices can be justified- can the price it is at today be justified? Mylan was sued over a year ago where they also defended themselves and said they have invested millions of dollars into the pen and that it only profits from less than half of the price. Yet people have not noticed a difference in the product (Pierson). Mylan is at risk for more competition, law suits, and a huge decrease in sales revenue. It is important for Mylan to recognize that the public is outraged and have also noticed there are no competitors for this drug unless the consumer plans on spending thousands in the hospital. AuviQ is reentering the market pricing the drug similar to the EpiPen for about $360 this month, around two weeks ago. Additionally, there will be a third competitor pricing at just $10 called

Adrenaclick which will be over the counter (Skinner). The public has already addressed concerned about the EpiPen pricing, lack of competition, and unwillingness to admit any fault. After reviewing all the evidence, EpiPen needs to lower their prices while also explaining how much money they lose in expenses due to the pharmacy manager cost that gets cuts and the insurance companies. The incoming of competition will lower EpiPen’s sales revenue in the United States and also lower concerns about Mylan’s EpiPen becoming a monopoly. However, they can now focus on the global market that has not been reached by their competitors. EpiPen will now be forced to lower their prices to compete with the other pharmaceutical drug, Auvi-Q. Because if Auvi-Q can sell as a prescription drug, dealing with the same issues as the EpiPen, EpiPen needs to compete with this change or get left behind by US consumers. Mylan’s pricing strategy for the EpiPen is not reasonable and their evidence holds some justification but is not enough to prove that $600 was an ethical price. Works Cited “GDP - Purchasing Power Parity - Comparison between France and United States.” MECOMeter Macro Economy Meter, mecometer.com/compare/france united-states/gdp-ppp/. Kesselheim AS, Avorn J, Sarpatwari A. The High Cost of Prescription Drugs in the United StatesOrigins and Prospects for Reform. JAMA. 2016;316(8):858–871. doi:10.1001/jama.2016.11237 Mangan, Dan. “Mylan CEO Heather Bresch Says Diversification Is Boosting Company after EpiPen Controversy.” CNBC, CNBC, 3 Mar. 2017, www.cnbc.com/2017/03/03/mylan-ceo-heatherbresch-discusses-epipen-controversy.html. “MYL Income Statement.” NASDAQ.com, www.nasdaq.com/symbol/myl/financials?query=incomestatement. “Mylan Worldwide.” Mylan: Seeing Is Believing, www.mylan.com/.

Paton, James, and Naomi Kresge. “Why the $600 EpiPen Costs $69 in Britain.” Bloomberg.com, Bloomberg, 29 Sept. 2016, www.bloomberg.com/news/articles/2016-09-29/epipen-s-69-cost-inbritain-shows-other-extreme-of-drug-pricing-itnvgvam. Pierson, Brendan. “Mylan Hit with Class Action Lawsuit over EpiPen Pricing.” Yahoo! News, Yahoo!, 6 Sept. 2016, www.yahoo.com/news/mylan-hit-class-action-lawsuit-over-epipen-price181506295--finance.html. “Pricing the EpiPen: This is Going to Sting”. (Rev Dec 16 2016). Darden Business Publishing University of Virginia. Ramsey, Lydia. “Why the Price of Prescription Drugs in the US Is out of Control.” Business Insider, Business Insider, 23 Aug. 2016, www.businessinsider.com/why-the-us-pays-more-forprescription-drugs-2016-8. Skinner, Ginger. “The EpiPen Alternative That Costs Just $10.” Consumer Reports, www.consumerreports.org/drug-prices/epipen-alternative-that-costs-just-10-dollars/....