news on EpiPen a drug making company

An injectable medication for allergic reactions is produced and sold by the pharmaceutical company EpiPen, along with other generic medicines. The EpiPen Company raised its costs by a scandalous amount between 2007 and 2015. The pharmaceutical company Mylan was embroiled in the "EpiPen Gouging Scandal," which involved a nearly 500% price increase for life-saving medicine over the course of seven years (CBS NEWS). This scandal was exposed after news reports about life-saving allergy equipment made it public, prompting a congressional probe. It was claimed that Mylan paid rebates with the intention of enriching its managers, which is why prices were rising (CBS NEWS).

The major undoing in Mylan’s EpiPen that made it look bad in the eyes of the citizens include: Neglect of responsibility; the CEO of EpiPen shifted the blame to Obamacare and the rise in health insurance plans. She failed to own up the fact that it was unfair to increase the drug prices to the common citizens. She also failed to explain how her salary had increased adversely by 700%. Crafty efforts to improve the sales; Mylan’s CEO Bresch’s mother was involved in the marketing of her daughter’s products. She encouraged states to make it a requirement for schools to purchase the medical devices from EpiPen while she was the in charge of the National Association of School Boards. Mylan was also involved in lobbying which saw it give a lot of EpiPen to many schools. Failure to listen to those who truly impacted; Bresch failed to pay attention to the advice given by those people who meant good for the company for instance doctor Mark Kenton.

Laws Broken During the Scandal

Misclassification of EpiPen; Mylan misclassified EpiPen as generic drugs to avoid higher rebates paid by drug companies. This led to Mylan paying $465 million to settle the debt it had collected over the years with the department of justice which had filled a case against Mylan.

Antitrust violation; an antitrust violation was launched against Mylan on the basis that the contracts made with schools to form part of the EpiPen4schools violated the antitrust laws.

Class action considering RICO; three EpiPen buyers claimed that Mylan engaged in illegal projects to dominate the market. They claimed that some agreements between some managers and Mylan were illegal. Mylan offered the managers large rebates in order to get favor over its competitors.

Anti-competitive acts; Mylan allegedly offered rebates to prevent competition. This was filed by a Sanofi SA one of the pharmaceutical companies. It claimed that Mylan offered rebates to pharmacy benefit managers, insurance agencies, and Medicaid agencies for them not to reimburse patients to use Sanofi’s products.

Impact of the Scandal

Reduction of the company’s stock valuation. Within three months Mylan shares went low by almost 10% of the profit it was making earlier. The company’s sales in North America fell by about 22% during that period. The company was charged high governmental rebates by the department of justice settlement as a result of underpaid rebates to the health program of the government. It faced controversy alleging it for insufficient rebate payments done to the Medicaid. Mylan had misclassified its drugs as generic to run away from the taxes charged on producing brand products.

As a result of the increased prices, most of the common population could not afford the epinephrine injector leading to its contraction in the market. Most people resorted to using products from other companies or the generic form. This also led to the suffering of the common population who could not afford the EpiPen medication.

Mylan also suffered the fate of being wrongly listed as a non- innovator med by the government citing rebating purposes. It was alleged that Mylan paid lower rebates for sales made through the government. This made Mylan to face many critics from both the government and the people. To redeem its name, Mylan came up with generic drugs though that did not save it from its fate.

The scandal also opened doors for other drug-making firms to come up to offer more discounted options for life-saving drugs. Although most of them did not last for a long period and some were lobbied by Mylan, they eventually came up again, and now we have a number of drug processing companies. This has therefore seen an improvement in the health sector of the country.

Factors That Contributed to the Scandal

Willingness to pay and pricing: because of the need by a large population to use the life-saving drugs the consumers were left with no option than to buy the EpiPen medication. This was fueled by the fact that Mylan had no competition and so it enjoyed the monopoly. Due to the fact that the consumers were willing to buy the drugs regardless of their prices, the buyers had no voice but comply with the give prices and pay voluntarily (Zaleski/AP).

Monopoly

There was lack of competition. There existed few direct competitors who for one reason or another did not pick up well. For this reason, EpiPen enjoyed monopoly, and because of high demand, its prices were forced to go up from time to time.

Lack of price control

The government of US has not put in place laws or regulations controlling the prices of drugs in the country. Drugs are sold at the prices pharmaceutical companies would like to. Because of this Mylan had the right to push up the drug prices to fit its demand and want at the moment. Pharmacy Benefit Managers and lack of transparency in pricing: according to Bresch, the health sector in the US was to blame for the rise in the prices. The health sector failed in giving license to the companies in order to increase prices and would also force the companies to increase the prices too (Tuttle).

Marketing cost

In order to sell it products, Mylan invested heavily in the advertisement. To get back the money spent, Mylan was forced to hike its prices so as to compensate money used in the advertisement.

Research and development costs

Increase in EpiPen prices were as a result of the costs incurred during research so as to improve the drug. Efforts were put in place to make the drug easier to administer, and more clear instructions about the products were given. In order to compensate for this, the prices of EpiPen were then hiked.

Inflation

Because of the increase in the cost of living, Mylan had also to increase its employer's salaries to meet the high cost of living. This made the production cost to go up the, therefore, resulting in hiked prices. This was also facilitated my increased cost of acquiring raw materials and transport of the drugs too.

Mylan pricing ethics

When put on the pricing ethics scale, Mylan passed some tests and failed some. In this case, the tests include:

According to Kozarich, the transaction becomes ethical when the price is paid willingly. Mylan passed this test in the sense that its customers were not forced to buy or pay for the products. It was a case of a willing buyer and a willing seller. Therefore, in this case, it was ethically right for Mylan. The consumer is provided with clear and ample information about the product. Mylan also passed this test since it gave its customers enough information about the drugs and instructions on how to administer them. It also went an extra mile in investing more in research and developing cost so as to make it more reliable to its users.

The sellers cannot exploit the buyer’s basic needs. Mylan failed this test, considering the fact that there exists a huge population suffering from allergies, it was unfair for on Mylan to hike the prices of these life-saving products. Some people cannot do without these drugs making them a basic need hence the hike in prices by Mylan exploited the buyers especially those from a poor background (Tuttle).

The price should be justified by costs. There should be no excess profits on basic products such as lifesaving medication. The exchange should give equal access to goods regardless of ability to meet the cost. Mylan passed this test as it gave access to discount to its products and also provided free EpiPens to schools and also facilitated activities related to allergy awareness.

Conclusion

Having passed most of the most of the ethical test concerning pricing, Mylan was right to hike its prices. Although it was unfair, especially to the common citizens who found it hard to acquire the drugs. The government should come up with laws regulating basic pricing commodities especially the lifesaving drugs. This would prevent companies hiking their prices anyhow to get unjustified profits and focus more on quality and meeting the needs of their consumers. On the other hand, drug manufacturing companies such as Mylan should also come up with generic products and other cheaper drugs that cater for the common population. The government should also facilitate more drug making firms to enhance competition which would see drugs retail at lower prices too.

Works cited

Kozarich D. “Mylan’s EpiPen Pricing Crossed Ethical Boundaries” Fortune.com, 27th Sept 2016, http://fortune.com/2016/09/27/Mylan-epipen-heather-bresch/

MANAGING BUSINESS ETHICS, Straight Talk About How To Do It Right, 6th Edition: Trevino and Nelson, Wiley 2014.

Mylan CEO on EpiPen drug price controversy: “I get the outrage”CBS NEWS, 27th January 2017, https://www.cbsnews.com/news/epipen-price-hike-contrversy-nylan-ceo-heather-bresch-speaks-out/

Tuttle, B. “Why the EpiPen Price Scandal Sums up Everything We Hate about Big Business & Politics” 21st September 2016, http://time.com/money/4502891/epipen-pricing-scandal-big-pharma-politics/

Zaleski/AP M. “EpiPen is getting crushed by a $10 copycat” Business Insider.com, 8th March 2017, http://www.businessinsider.com/after-years-of-price-gouging-mylans-epipen-gets-crushed-2017-3?IR=T