Epi-Pen® and Predatory Pricing: You thought our health system was designed for people’s health?

Martin Shkreli, the former CEO of the drug company Turing, achieved his 15 minutes of fame (or infamy) last year through predatory pricing, raising the price of pyrimethamine, an old drug used to treat a parasitic infection in the brains of immune-compromised (usually HIV-infected) people from $13.50 to $750 a pill (Drug prices and corporate greed: there may be limits to our gullibility, September 27, 2015). Shkreli manage to further alienate people by his testimony before Congress, widely described using adjectives such as “smug” and “condescending”.  The most recent Pharma CEO to hit the news for price gouging, Heather Bresch of Mylan, seems to be trying to avoid Shkreli’s “doubling down” by making an apology, of sorts.

Bresch’s company, unquestionably with her active involvement, raised the price of Epi-Pen®, a self-injectable form of epinephrine that is sold to prevent people from dying from severe allergic (anaphylactic) reactions to a variety of substance, from peanuts to bee stings, from about $100 to $600 for a 2-pack. Two things: first, such pens are lifesavers. As a physician, when I tried to figure out what I needed to pack in an emergency first-aid kit for camping, it was #1. It was the only thing I could think of that actually could keep someone from dying in the woods. Second, epinephrine is an old, cheap drug. As ABC news reported, a doctor in Canada showed how a physician can prescribe a whole vial, plus small syringe and needle, for under $10, and a person can easily inject themselves, just under the skin. The “value” of the Epi-Pen is that it is self-injecting, but hard to even justify the $100. Or the somewhat higher cost of a generic (Mylan, indeed is a generic company.) Bresch, the daughter of a US Senator, was awarded an MBA by West Virginia University despite not finishing the coursework (which led to the resignation of the president). She protested that she wasn’t being predatory like Shkreli, and offered to sell the drug at a 50% discount, only $300! That is still a lot. I have a friend whose daughter is allergic to peanuts; both her day care centers require her to have a 2-pack of Epi-Pen®, with prescription (thus can’t do the epinephrine bottle) – this could cut her outlay from $1200 to $600. Of course, she will spend it to potentially save her daughter’s life, the key point that Mylan and Ms. Bresch understood when they raised the price. At more or less the same time, Ms. Bresch raised her own salary from a paltry less-than-$2 million a year to $18 million. I guess the rise in the price of Epi-Pen® funded that. MAD Magazine® used to do satire but its recent coverage of Epi-Pen® is almost investigative reporting (see picture).

Could it get worse? Sure, why not? Bresch’s father, Senator (and former Governor) Joe Manchin of West Virginia may or may not have been helpful to Mylan (it is, after all, a West Virginia company), but many politicians have been tied to helping drug companies make lots of money. Bill Moyers covers the role of Billy Tauzin, a former Congressman from Louisiana who chaired the House Energy and Commerce Committee when Congress passed the Medicare drug plan (Medicare Part D) under President G. W. Bush. That legislation prohibited Medicare from using its clout to negotiate lower drug prices. Tauzin left Congress in 2005 and became chief lobbyist for the Pharmaceutical Research and Manufacturers of America (PhRMA), converting his well-paid (by campaign donations) service while in Congress to a MUCH better-paid job lobbying his former colleagues. He is credited with having a major impact on the ACA, passed in 2010, ensuring its Pharma-friendly characteristics. And, to be sure, Tauzin, who left PhRMA after 5 years, was scarcely alone in pushing pharmaceutical industry interests in Congress, or in receiving big donations, as the Moyers piece documents. Congress appears to buy the idea that Pharma needs high prices for doing research and development (despite the fact that they spend many times their R&D budgets on marketing, and much of the basic research is done with government funding at universities) and that other countries’ restrictions on the prices of their drugs require them to charge Americans more. Of course, the real reason that pharmaceutical companies charge so much in the US is that they can get it. Whose interests is Congress working in when it does this? Not the American peoples’…

I recently discussed the fact that some large insurers (Aetna, United, Humana)  are leaving the health insurance exchange marketplace in some parts of the country because they are losing money (or, perhaps, just not making enough) because too many sick people and not enough healthy people are signing up, turning the insurance model on its head.  Although the ACA contains an individual mandate, lots of people with less money and/or fewer health needs are not signing up and paying the penalties, which are much less costly (if they are even “caught”). Of course, the ACA did not include a “public option”, which would have been much less costly, specifically to offer these insurers a competition-free field. This is discussed in detail by Princeton health economist Uwe Reinhardt in a JAMA Forum on August 25, 2016 “Why Are Private Health Insurers Losing Money on Obamacare?”. The reason comes down to the same one that has always been true, and that I discussed a number of years ago (October 20, 2009, Red, Blue, and Purple: The Math of Health Care Spending) – a small minority of people account for most health care costs. I have attached a graph from Reinhardt’s piece that makes the same point. And, although he explains the reason insurers lose money, Reinhardt does not excuse it. "If health care costs in the United States were lower, most people would probably agree that ill, low-income citizens should receive the needed health care that is available to better-off individuals. The problem is that our health system is in danger of pricing kindness out of our souls."

So we have both the greed of pharmaceutical companies and the greed of insurers. As discussed in many recent articles in the popular press, the bottom line is that the health benefit to Americans is at best a side effect of complex plans engineered to make profit. This perverted approach, almost unique to the US, has marginalized, bankrupted, and caused illness and death in many. This system doesn’t work for people. A fairly well-off couple caught in the bind of insurance costs is profiled by AP in its “The Big Story: “Without a subsidy, couple faces higher insurance premiums”. The husband notes the failure of our system to ensure that people’s health is a greater priority than corporate profit:  "Ultimately, it's clear that health care is not something that can be efficiently provided by the private sector. The rest of the Western world has figured out that health care is a right and is intrinsically a government, public-sector activity.”

Don McCanne, in his Quote of the Day,  provided that link on August 22. And then, on August 23, a profound and direct commentary from the editors of the Des Moines Register, “Editorial: Government should not rely on private insurers”:

“Americans’ access to health insurance should not depend on the profit margins, business dealings, or mergers of for-profit companies. Not in Medicare. Not in Medicaid. And not in exchanges created by health reform law. Instead of funneling tax dollars to private companies, government is better equipped to administer insurance. It is not beholden to stockholders. It does not seek to turn a profit. And it will not abandon the responsibility of providing health coverage to Americans.”

Professor Reinhardt and those editors are right. Our souls are certainly in jeopardy. And so are our pocketbooks. And so is our health.