FDA, Not Big Pharma To Blame For The Epi-Pen Price Surge

The increase in the price of Epi-Pens over the past few years is an absolute travesty. You’ll be hard pressed to find anyone who disagrees. Now people are calling for legislation to fix the problem, but it’s over-legislation that put people who depend on the drug in this position to start with. Less regulation is where we need to look to solve this problem, not more.


The lifesaving drug Epinephrine is the medicine inside the Epi Pen that has saved countless lives. The amount of medicine inside the pen costs a dollar. Literally $1.00. Epinephrine is clearly cheap and is readily available. The expense comes from the design of the injector pen, which is patented by Mylan. This government issued patent is one of the hardest obstacles other companies have had to overcome when trying to enter the market. Obtaining FDA approval has proved to be difficult and costly for competitors trying to get their product out there. While not defending Mylan, the government that imposed barriers to entry into the market put them in a position to increase prices 400% since 2007.


The good news is that the market is already responding and working the way it should. For Mylan, they have seen their stock take a serious hit with all of the bad publicity. This prompted them to announce a generic version of the Epi-Pen expected to hit the market relatively soon. The FDA is also making a point to show that other generic Epi-Pen type products are on the way as early as next year. This makes two things abundantly clear. One, that overbearing government restrictions on market entry lead to higher prices and borderline monopolies. Two, this is a textbook illustration of exactly how the free market is supposed to work when prices are pushed too high by businesses.


Unfortunately, the unjustified price increase of some key drugs is all too common within the healthcare industry. Some CEO’s think they can increase a price simply because people have no other choice. Their consumers are a captive audience. Except, that strategy doesn’t pay off. Take the example of Valeant Pharmaceuticals and its then C.E.O. Martin Shkreli who bought the rights to two drugs, and raised the prices 525% and 212%, respectively, within the same day. After national outrage and dwindling sales, the pharmaceutical company’s stock fell 70% within nine months, and is now struggling to stay afloat. Not only was Shkreli outed as C.E.O., but he was put in the spotlight and eventually accused of several other shady business practices, for which he is facing several lawsuits and criminal charges. This goes beyond a response from the free market, and launched into the court of public opinion, which can be much more cruel.


So, what’s the solution? We can’t have drugs on the market that are harming people or not doing what they say. In that respect, and in that respect only, the FDA has a purpose. The problem lies in the cumbersome and expensive artificial barriers to entry that the FDA has imposed on the pharmaceutical market, which are about twice as lengthy as those in Europe. Before a company can even begin producing a new drug, generic or branded, they must fill out applications with the FDA, which can take up to 17 months for approval. The vast majority, over 90%, are not approved in the first cycle, and nearly 70% are not approved in the second. In 2012, Forbes reported that the cost to bring a new drug to market could cost between $1.3 billion and $12 billion, with the possibility of not producing revenue for 10 years. Not exactly a very enticing incentive to start a company.

With government imposed red tape, wait time, and costs, it’s no wonder drug companies feel like they can charge what they want for their products. They know that competition simply can’t pop up overnight and take their market share. It’s too costly and time consuming. No one is defending the price increases by big pharma, but we have to remember that for as much damage as the Frankenstein monster can do, we must first look at and place the blame on the mad scientist who created it.