
The EpiPen, a Case Study in Health System Dysfunction - ChazDazzle
http://www.nytimes.com/2016/08/24/upshot/the-epipen-a-case-study-in-health-care-system-dysfunction.html
======
adocracy
It's unfortunate the NYT story doesn't get into the billings process as part
of the dysfunction. It makes me wonder how the pricing is then negotiated with
the insurance companies. Did they set the retail price so high because the
insurance companies were refusing to pay a workable price? Mylan has already
commented that most EpiPens are paid through insurance, and there's the
"billed rate" and "paid rate" on claims reports which often shows outrageous
retail prices by health providers and then the negotiated rate the insurance
company actually paid. Mylan's "quick" offer of a $300 discount to individual
payers appears to keep in line with this and potentially not impact the
insurance claim issue, but does anyone have any evidence that this theory is
mistaken?

~~~
cheriot
If that's the case, then the market equilibrium makes un/underinsured patients
collateral damage in a battle between pharmaceutical and insurance companies.
That's a massive market failure that's killing its victims.

Here's my capitalist suggestion: figure out how much the pharmaceutical
company stands to earn from life saving medication. Then let the government
purchase the rights and put them in the public domain. The variable costs of
producing these things is so low that we can treat every one for nearly the
same price as treating only the rich.

~~~
JoeAltmaier
Lets go further: nationalize drug companies. Do this to _all_ the drugs.

~~~
GunboatDiplomat
I think it would make more sense to simply have a government owned corporation
who's sole purpose is to produce generic drugs on which the patent has
expired.

~~~
maxerickson
The market for drugs like that generally functions quite well. Like a cash
price of ~$5 a month well.

(The dustup over Martin Shkreli raising the price of Daraprim only happened
because there were very few users of the drug)

------
jcbeard
"When Mylan bought it, EpiPens cost about $57 each."

I can concur. I have a family member I purchase these for. At first, it was
like...okay, $50 after insurance. Now $100 after insurance. The thing
is...nobody really seems to care until things spiral out of control. Who the
hell is watching our backs in America? Is it the FDA, the FTC, Congress
(likely too busy defunding AMA to care), the DoJ? No idea. I wonder if gov't
agencies like the DoD who stock tons of epipens pay the same prices that we
the public do? Does the DoD purchase from another market to get out of the
huge sticker price? I'm curious to see how many people in the gov't get around
purchasing these in the US for their own agencies yet didn't raise extreme
alarm at the ballooning prices for the American consumers.

~~~
autokad
what is really amazing is the epi pen, even for those who need it, is a tiny
fraction of our healthcare costs. the gorilla in the room is doctors pay, in
which the US purposely keeps low in supply to keep the wages high.

doctors easily make north of 200k after residency(a number almost no engineer
will ever come close to), and people complain over hundred dollar epi pens.

~~~
sxg
Take home pay for physicians represents about 10% of healthcare spending
([http://economix.blogs.nytimes.com/2008/11/14/do-doctors-
sala...](http://economix.blogs.nytimes.com/2008/11/14/do-doctors-salaries-
drive-up-health-care-costs/)). On top of the cost of 4 years of college,
you've got 4 years of medical school (average med student debt is $167k -
[http://www.cbsnews.com/news/1-million-mistake-becoming-a-
doc...](http://www.cbsnews.com/news/1-million-mistake-becoming-a-doctor/)). On
top of that, you've got 3-7 years of residency where residents barely make
$50k/year while working ~80 hours/week (this is a reduction from ~120
hours/week after regulations were passed). Becoming a doctor is expensive,
requires massive sacrifices in time, and doctors don't earn their full
salaries until almost a decade after most people start their careers. It
doesn't seem like physician salaries are a clear cut problem.

~~~
autokad
engineers barely make more than a doctor in residency. virtually no engineer
on earth makes as much as any doctor after residency.

i dont know about you, but i pulled 80+ hour weeks working, studying, and
skill training to get myself where I am today. If I am lucky, and If I spend
nights reading code interview books, practicing my skills, maybe I'll get a
great job at google/facebook after 4 interviews and some connections making
1/3 - 1/2 as much as an average doctor.

~~~
sxg
I'd be more inclined to buy your argument if you supported it with evidence.
Also we're talking about the impact of physician salaries on healthcare
spending. Engineer salaries aren't relevant in this discussion.

------
endswapper
This is concerning on so many levels because there are multiple agencies that
are supposed to oversea and simply avoid issues like this.

In principle I am opposed to regulation, but in this case, where all other
measures have failed, I say regulate away.

I want to call out Heather Bresch, Mylan CEO, by name because she and Martin
Shkreli are the problem as well as any investor or board member that doesn't
steer them back to being human.

This comes down to life and death for people. The instrument is simple,
accessible and cheap. This doesn't make the instrument more valuable, but more
necessary. Mylan is simply exploiting its customer base temporarily caught in
the middle.

~~~
b6
> In principle I am opposed to regulation, but in this case, where all other
> measures have failed, I say regulate away.

But the article says there would be competition except that it's too hard to
get a product to market. Doesn't the author mean it's too hard to compete
because of regulation, like from the FDA?

~~~
endswapper
Pardon if this point wasn't clear. I am talking about additional, direct
regulation related to this product and this issue.

Normally, I would say the logic doesn't follow that, the answer to failed
regulation is more regulation. However, in this case, my opinion is that we
should call this out for what it is and do something to counteract it.

~~~
phil21
This is a ridiculous stance to take. So because one drug/company decided to
raise prices 1500% we need to take immediate and specific action.

But those companies who operate at 600% markup in the same industry are
perfectly fine.

I can guarantee you the latter are where the actual problem lies - since it's
systemic. The outliers that get press are good - but only if people solve the
problem vs. kneejerk reactions like specific legislation for a single drug.

My point is that _every_ drug company is doing this. And not a little bit. We
shouldn't set some ridiculous threshold before we take action (as long as
we're stolen from, it's ok if it's only a small amount right?) - we should fix
the problem where it begins. This means adding competition to the market, in
which case the usual race to the bottom should occur. You are basically
advocating for a tiny measure that "fixes" a fraction of a fraction of a
percentage of wasteful drug spending - and simply focusing on manufactured
outrage. This is how the industry continues to win.

~~~
endswapper
It's not ridiculous at all.

If we are talking about one company then specific action seems appropriate.

I agree that there are systemic issues. I think that is a larger conversation
that will take more time. There are merits to the European systems that are
generally more liberal, or at least are characterized as such, and likewise,
merits to the US system. We could probably cherry pick examples in each system
and perhaps that is how it will continue in that larger conversation.

However, in this instance, which is the context I am focused on we recognize
that allowing a monopoly is a failure. It presents special circumstances, so
special action to sidestep the bureaucracy seems appropriate to me.

I believe that the proverbial 2x4 to the head (of Mylan, in this instance),
would do more to further the larger conversation and the points we agree on,
than waiting for the conversation to conclude with a pretty bow. It won't.

Making examples of the most egregious perpetrators has an immediate, albeit
incremental impact.

~~~
phil21
I guess we'll have to agree to disagree. I see negative value in stamping down
the outliers. This just sweeps the conversation under the rug and people feel
good about "doing something". We then all can rage against the latest
scapegoat who is doing exactly what everyone else in their position is - they
just got a bit too aggressive and got unlucky on the roll of the PR dice. The
rest of the industry laughs and continues to reap 900% margin on generic
products, and increases it 15% next year since 15% is totally reasonable. We
then repeat the next two minutes of hate every 2-3 years.

We are talking about a price increase from a floor that was _already_
absolutely insane. $300 for a $20 or less to manufacturer device is already
being ripped off, and we are only just now talking about it because it went to
$600. Why is there a difference in reactions here? Are you the one who gets to
judge a $580 profit is ok vs. a $280 profit? Why? They both seem obscene to me
- why is this just now becoming a problem? Obviously $300 is an acceptable
price - so is $400? $500?

This is just the tip of the iceberg. If you start by clipping the tall poppies
you might get some extremely slight downward pressure on prices in the market
- but that does nothing to solve your actual problems. It's penny wise and
pound foolish and is the approach we've thus far taken with predictable
results.

~~~
endswapper
I think that, generally, in principle, we agree.

Where we disagree is in practice.

Doing nothing, or a little empty outrage is sweeping it under the rug, or "the
approach thus far."

What I am talking about has a practical benefit beyond targeting the worst
offenders, which again seems appropriate. Establishing a precedent for what is
"too aggressive" frames the conversation going forward. Otherwise, your logic,
"Obviously $300 is an acceptable price - so is $400? $500?," is valid. When
human lives are at stake I don't think it is. So, establishing a precedent and
thereby the beginning of a framework we move the conversation forward rather
than just another lap on the rotary.

I also disagree that doing something is the same as doing nothing. I find that
practically and logically false. Particularly, in the context of progress in a
bureaucracy, it has been the modest incremental changes that have created the
opening for larger reform.

~~~
phil21
I think we generally agree in the outcome we want, just disagree on how to get
there.

I'm not proposing doing nothing. I'm stating making targeted efforts to go
after this specific case is a silly waste of effort (at best - at worst it's
placebo) is all. I would rather see that effort go towards actually reforming
the system that allows monopolies to form when they don't make (open) market
sense.

Otherwise I do think we agree - the end result is Mylan can't charge $600
Epipen.

~~~
endswapper
I acknowledge and respect your preference for larger reform. I think that
would be great.

In the meantime, why is it binary in your mind? Why is it larger reform or
nothing?

Because this does have a life and death impact, I don't think it is silly, or
a waste. The efforts, at worst have potential to move the larger reform
forward, and at best potentially save a life.

------
petilon
The World Trade Organization has a provision known as "Compulsory Licensing"
which can be used in extraordinary situations such as this. Compulsory
licensing is when a government allows someone else to produce the patented
product or process without the consent of the patent owner.

A few years ago, India's government authorized a drug manufacturer to make and
sell a generic copy of a patented Bayer cancer drug because the price charged
by Bayer was unaffordable to most of the nation. The US pharmaceutical
industry has been up in arms about this, and has been exerting pressure on
India to stop this practice. But abuses of the system by Mylan (with EpiPen),
Turing (with Daraprim) and others would seem to justify the Indian practice.

In fact the US would do well to copy India's model. Citizens should be able to
sue corporations for egregious abuses of the patent system, and courts should
be able to provide relief in such cases by granting a compulsory license of a
drug patent to a generic maker.

Read about compulsory licensing here:
[https://www.wto.org/english/tratop_e/trips_e/public_health_f...](https://www.wto.org/english/tratop_e/trips_e/public_health_faq_e.htm)

Read about India granting compulsory license to Bayer cancer drug here:
[http://www.nytimes.com/2012/03/13/business/global/india-
over...](http://www.nytimes.com/2012/03/13/business/global/india-overrules-
bayer-allowing-generic-drug.html)

~~~
drakonandor
An interesting model, taking advantage of other countries taxpayers and
innovation so you never have to fund any research yourself.

I'm sure that will work out well to better humanity as a whole - especially
when there's no reason to actually invent anything new because every other
country is just waiting to steal it.

------
rokosbasilisk
Isnt this a much more simple tale of greed and corruption. the ceo is the
daughter of a democrat senator and lobbied big government the jacked hwr
salary 600x. Just another shkrelli, maybe even worse because she lobbied for
schools to have them.

------
kirrent
The majority of the comments here are interesting to me because they're
talking about the cost of an epi-pen after insurance. The problem doesn't seem
to be some mismatch of the interplay between drug price and insurance rebate
but just how incredibly expensive an epi-pen is in America because of a lack
of collective bargaining on price.

For comparison, here in Australia, the dispensed price for an epi-pen is
96.57AUD which includes everything, even the maximum markup from the
pharmacist (as far as I understand the pricing mechanisms). Of course,
depending on insurance arrangements and personal circumstances you'll end up
paying less with a maximum of 38.30AUD out of pocket but that's a different
part of the system.

I don't see how the dysfunction is any of the things mentioned in this article
as opposed to the ridiculous prices insurance companies and patients are being
charged for it. Many drugs expire quickly, are hard to administer, and are
difficult to make. All that means is that we need them done well and we need
to pay the least we can.

~~~
maxerickson
There are various entities that collectively bargain drug prices in the US.
It's just that other groups and individuals may not have access to the prices
they achieve.

(several large insurers provide coverage for more people than live in
Australia)

It seems the problem in the US is that a patent that "improves" a product ends
up creating a new period of exclusivity (it's not clear to me if this is just
because the improved version becomes the new standard of care or because
people are nuts and demand the very best regardless of whether the difference
is particularly significant).

------
golergka
The most interesting thing here would be the lack of competition, but the
article, which was pretends to be a "case study", just leaves it at "various
reasons". What the hell? It's not like an individual company's responsible for
keeping the price sane; it should be kept down by the whole market — and if
the market's malfunctioning, government's to blame, not the company.

------
Eric_WVGG
I've got a question about price caps, would appreciate a non-trolly/non-
sarcastic answer if anyone is informed on the topic.

We know that epi-pens cost under $50 to make, because they're sold profitably
in Canada for around $60.

And I recognize that companies are entitled to make a profit, and that drug
companies (sometimes) use those profits on R&D for new and better products.

But we see instances of clear cash grabs. Sometimes they're due to
circumstances (in this case, a generic alternative failed FDA approval, and a
competitor left the market); other times a drug company will buy up
competitors and consolidate the market (Turing Pharm).

Why don't we have some sort of market cap of 3-4x or even 10x the cost of
manufacturing a drug that is implemented after the R&D has been paid off? I
get that companies would bend over backward to inflate that R&D figure, but
sooner or later they would have to admit that it was paid for and need to
settle into a mode of merely making reasonable profits instead of insane
profits.

------
tomohawk
It would be interesting to hear the other side of the story. So far, as in
this piece, there is only the implied or stated theory that the price
increases are due to greed, or just because they can.

This whole thing reminds me of the flu vaccine debacle. The original narrative
was that flu vaccines cost less in other countries, so why not in the US? Must
be due to some greedy capitalists! The truth turned out to be a bit more
nuanced.

[http://webcache.googleusercontent.com/search?q=cache:-08YyGE...](http://webcache.googleusercontent.com/search?q=cache:-08YyGEf18EJ:www.ncpa.org/pub/ba493&num=1&hl=en&gl=us&strip=1&vwsrc=0)

It should surprise no one that these kinds of price problems occur in a system
with heavy regulation, very little choice, and no transparency.

~~~
maxerickson
There's a different epinephrine auto-injector that has generic versions. The
generic versions cost $150 for a set of two
([http://www.goodrx.com/adrenaclick](http://www.goodrx.com/adrenaclick)).

It's reasonable to assume that most of the $350 difference goes to things like
marketing, profit and shenanigans to encourage people to utilize their
insurance (the rebate cards eliminate copay and some deductible costs and
extract money that eventually has to be paid out of premiums...).

~~~
MichaelGG
If there's an alternative, then what's the issue? Well a quick search shows 2
alternatives have had recalls. So maybe they have QA issues. Adrenaclick says
they lack the ability to scale up to more market demand. So perhaps they
should raise their prices a bit to build out facilities?

~~~
maxerickson
If you twiddle the generic/brand menu (just to the right of the blue
"Prescription settings") at my above link, you'll see that their price is
already ~$475.

So my above point is more that the generics provide a lot of information about
what it costs to have a product on the market (which the comment I replied to
was speculating about). When companies price higher than that, they are
presumably doing it in a way that tends to maximize profits and are
responsible for the choices they make to do that.

