Fact: The FDA Engineered the EpiPen Monopoly
Market competition would solve the problem of EpiPen's exorbitant pricing. But big government hasn't let that happen.
Do the prices of the healthcare market need to be heavily regulated to remain affordable for consumers? Recently, two companies have raised prices to a level that aroused public ire. This is the tale of two competitions: one with a happy ending, and one whose ending remains uncertain.
Last year, Turing Pharmaceuticals raised the price of an important AIDS drug, Daraprim, from $13.50 to $600 per pill overnight (before 2010 it cost only $1). The public was outraged and Turing’s CEO was grilled by Congress.
There were two possible ways forward: government steps in and regulates the price of Daraprim, or the government allows the market to correct the price hike. Within a month, a company called Imprimis Pharmaceuticals announced they would produce a generic version of Daraprim for $1 a pill.
Many are using the EpiPen tale as a reason to call for tax-funded socialized health care, but they fail to see that the government caused the problem in the first place.
The government did not enable Turing to maintain a monopoly on the market, nor did they regulate prices, which would have created an artificial market and distorted the process of innovation and of competitors undercutting the current price. Instead, the government allowed other companies to compete, which resolved the price problem completely.
The tale of EpiPen is not so happy. Mylan owns the rights to the various designs of the auto-injecting devices that make up the EpiPen. Mylan used to sell their devices for $100 for a two-pack in 2007. They have since raised the price to $600 per pack, while the CEO, Heather Bresch, has taken huge pay raises. Of course Mylan has the right to make a profit and to use those profits for beneficial pharmaceutical research. But when the profit margins become so excessive that the company receives public scorn, surely a company like Imprimis would step in to create an alternative to undercut Mylan and make a huge profit by stealing all their customers.
Unfortunately, the FDA is Mylan’s best friend. According to Jonathan Newman, the FDA has continually blocked attempts by pharmaceutical companies to create an alternative to the EpiPen. Adrenaclick has made an alternative, but the FDA has made it illegal for pharmacies to substitute Adrenaclick for EpiPen.
The result? Government regulation and the FDA-created monopoly has allowed Mylan to increase prices to a level that many in the public and in the pharmaceutical company deem abhorrent. Many are using the EpiPen tale as a reason to call for tax-funded socialized health care, but they fail to see that the government caused the problem in the first place.
To quell public outrage, Mylan just announced they would sell a generic version of EpiPen for $300 per pack. Usually companies introduce generics only to compete with generics from other companies, but Mylan’s generic will only compete with its brand-name EpiPen. So again, lack of competition (and in this case, artificial competition) ensures that the customer loses and the monoplizing company wins with huge profit margins.
The lesson? In Mylan’s case, greed and government regulation created a monopoly that has allowed the price of a necessary medicine to rise to astronomical prices. In Turing’s case, economic freedom, competition and self-interest enabled another company to innovate and undercut the leading provider, thereby lowering the cost of an important AIDS pill by 99.9%.
We don’t need more government regulation to solve this problem, we need more market competition.
Do note, however, that these are only two anecdotes. While they support the superiority of a free market over government regulation, that does not mean all government regulation is bad. But all government regulation that creates monopolies is undesirable, and often harmful, as in the case with Mylan.
Todd Scacewater (BA Political Science, MDiv, ThM) is a Teaching Fellow and PhD candidate in Biblical Studies at Westminster Theological Seminary. He is the senior editor for A Public Faith and Exegetical Tools, and he serves as an associate pastor of a local church. Follow him on Twitter.