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Imprudent Pricing

Mylan had a lot of good fortune after obtaining the EpiPen in 2007. They settled a lawsuit that forbade generic competition until 2015; their main non-generic competitor (Sanofi’s Auvi-Q) ran into problems in 2014; and Teva’s generic was rejected by the FDA in 2015. With each blessing, Mylan upped the US price. Today, an Epipen costs around 500 percent more than it did when Mylan first acquired it.

But their good luck ran out when news of the soaring prices began to reach Congress people and went viral in the national media. The story snowballed until Mylan released their reactionary response, which included plans to develop a generic at half the cost. Unfortunately, the damage has been done.

Mylan’s pricing decisions fundamentally failed to take into consideration brand loyalty and profitability over the long term. The patients who use the EpiPen are unlikely to outgrow their life-threatening allergies and, in my view, Mylan should have been asking, “How do we retain our customers?” rather than, “How can we maximize our profits whilst we still have a monopoly in the market?”

The truth is that a large number of customers are going to dump the EpiPen as soon as there is a viable alternative on the market. Epinephrine (the drug that the EpiPen injects) is labile and can go out of date relatively quickly – as well as be perturbed by bad weather conditions. Mylan currently offer a refill alert, but why not a free refill program? Or perhaps a replacement program for the injector? These kind of promises can engender loyalty and create lifelong customers.

Mylan says that changes to the US healthcare insurance landscape are to blame for the price increase, but neglects the fact that the manufacturer has been the prime mover. At Saint Joseph’s University, we teach a course on pharmaceutical pricing and one of the primary considerations is how the drug will fit, and be integrated, into the US healthcare system. There are some special plans; for instance, if you want to sell your drug into a federal supply area then you have to offer a 24 percent discount. Since you know that from the beginning though you just need to adjust the price accordingly.

I spent 28 years in pharmaceutical sales before moving into academia, and when we carried out our market research we always had to clearly define our effective population and work out the insurance status of that effective population. In the US, companies have reimbursement assistance programs and a hotline that customers can ring to talk about reimbursement or product replacement. You’ve got to answer the question: how can our product comprehensively fit into the healthcare system in a way that we can induce loyalty from the patients who are going to be using our products routinely – hopefully over a number of years?

The price of the EpiPen, in many cases, is being passed on to individual patients – and the sad story is that some won’t be able to afford it. Mylan should have foreseen that increasing the price of a potentially lifesaving device by such a substantial amount – particularly after the Turing Pharmaceuticals debacle, and in an election year – would cause controversy. Mylan have perhaps been their own worst enemy by creating this scenario. And though their response has elements of what they should have been thinking about from the outset, the time to plan is not when you’re under duress.

For companies deciding how to price their products, I can’t stress enough the importance of a fully considered strategy that positions you product for long-term integration into the healthcare system, including plans for working specifically with patients to engender brand loyalty. I believe that Mylan failed to do this – and they are now paying the price.

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About the Author
George P. Sillup

Dr. Sillup is currently the Chairman of Pharmaceutical & Healthcare Marketing and Fellow in the Pedro Arrupe Center for Business Ethics and the Institute of Catholic Bioethics at Saint Joseph’s University. During 28 years of work in the diagnostic, pharmaceutical and medical device industry where he held positions from salesman to COO, Dr.Sillup was responsible for several product launches that included attaining favorable reimbursement coverage and coding to support products in the US and global markets. Since full-time transition to academia in 2004, he has emphasized teaching at the undergrad and graduate levels that utilizes his industry experience and research that generates publications about ethically based strategy and healthcare reform.

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