If you’re on Facebook or Twitter, you know that 2016’s poster child for Big Bad Pharma was Mylan (MYL), makers of the EpiPen. While 2015 gave the dubious honor to Martin Shkreli, under whose CEOship privately-held Turing suddenly and dramatically raised the price of rarely-used Daraprim, the EpiPen’s gradual but steep price increase seemed to generate far more public outrage.

#Epigate

EpiPen product photoThis deluge of public opinion was likely due to the EpiPen’s widespread use and familiarity — to the point where the lifesaving epinephrine dosing mechanism’s brand name is practically as synonymous with the product as Kleenex or Band-Aid with theirs, especially among parents and public safety professionals. It’s also possible that the high profile success of Shkreli’s skewering helped lay the foundation for the ensuing outrage over EpiPen.

The company had already begun attracting public disgruntlement by periodically raising the price by 15% for years. EpiPen’s price hike in August 2016 meant families hoping to prevent death by anaphylactic shock were paying nearly sixfold what they had a few years ago. Ouch.

Such price hikes run afoul of SASB recommendations for affordability in Biotechnology. The standard suggests drug price increases should not outpace the Consumer Price Index. But why?

A healthy dose of perspective

In a free market, the risk would be clear. Other drug companies would see such high prices as an opportunity; this alone would likely discourage a wise company from this price strategy. But many hurdles complicate and thwart such competition, such as the extraordinary cost and risk inherent in R&D, the time to clear the FDA, and marketing. The odds are not favorable. The average cumulative cost of bringing a new drug to market has helped the ROI on drug development drop precipitously.

While Mylan, a for-profit business, may have had many valid reasons for raising their prices — not the least among which is the simple fact that they can — a market shaped so strongly by the artificial pressures of government funds and mandates (whose current shape was coincidentally architected by a big pharma lobbyist) means a different set of inherent risks. Pharmaceutical companies stand exposed in the court of public opinion, inviting the crossfire of indignant commentary in all forms of media and congressional interrogation.

A tough pill to swallow

In the ongoing aftermath of #epigate, this translated to a dramatic drop in Mylan’s stock price (from which it has yet to recover), EpiPen price discounting, release of an in-house generic EpiPenrevival of a defunct competitor, heavy layoffs, release of a CVS generic EpiPen alternative (despite usual FDA backlog), slashed earnings, and the Congressional investigation’s discovery that Mylan had been under-rebating Medicaid, prompting payment of a $465 million settlement.

Ouch.

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