First topic: From an economic standpoint, has Mylan made profit for the company which made the price increase adequate? Explain how the monopoly of Mylan was exacerbated by the FDA and how their margins were huge. LITERATURE REVIEW
Mylan is run by Chief Executive Officer Heather Bresch. The company was founded in
1961 with a mission statement reading “helping people in small West Virginia towns and rural
communities gain access to affordable medicine” (Peters). Four decades later, in 2007, Mylan
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had grown into a global firm going by a new mission statement reading “At Mylan, we are
committed to setting new standards in healthcare. Working together around the world to provide
7 billion people access to high quality medicine” (Peters). The company also emphasizes
innovation, reliability, leadership, and specifically “do what’s right, not what’s easy”. Following
the purchase of EpiPen from Merck, the Mylan website read “At Mylan, we put people first,
trusting that profits will follow” (Peters). All these messages are contradictory to the actions of
price gouging performed by the company.
The Federal Drug Administration (FDA) has played its own role in the crisis. As of 2016
the only company in the United States selling EpiPens was Mylan, holding monopolistic power
over the market. The FDA has rejected many companies who have tried to join the market. In
comparison to the United States single producer of EpiPen, Europe has eight. Competition is
extremely important, and if new companies do not compete with Mylan in the United States,
then price gouging will continue to be a legitimate concern (Ho). One potential competitor was
approved but the product was later recalled. Two other companies saw their bids to sell the
product rejected by the FDA. The FDA is responsible for the safety of the public when it comes
to drug administration, however, it should not be a challenge to develop delivery devices that the
FDA can approve of. Forbes recommended if the government intended to increase competition in
the market, waiving or increasing the speed of aspects of the FDA approval process would lower
costs of entry and encourage companies to pursue the new markets (Dorfman). In “GOP E&C
Members Ask if FDA Criteria to Blame in Part for EpiPen Mess”, according to lawmakers, laws
and regulations “must promote a competitive prescription drug market” and “ultimately lower
the cost of prescription drugs for America’s Patients” (Lim). Lawmakers asked questions of the
FDA such as ‘how many applications for generic EpiPen’s have been submitted and how many
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Fusari: Ethics Versus Economics: The EpiPen Scandal and the Role of the F
Published by DigitalCommons@SHU, 2021
have failed’. They asked about pending applications and whether these applications are being
prioritized. They even inquired about the approval criteria for such products (Lim).
The increase in prices due to Mylan’s monopolistic position on the EpiPen market stirred
much political debate. Politicians such as Chuck Grassley, a republican of Iowa, and Amy
Klobuchar, a democrat of Minnesota, both pushed bills to prevent what is known as a ‘pay-fordelay’ (*Lim). This tactic was used to delay the appearance of Teva’s generic EpiPen in 2011.
Mylan filed a citizen’s petition to challenge Teva’s entry to the market just weeks prior to the
deadline for the FDA’s approval on the product (Lim). Klobuchar believes “this outrageous
increase in the price of EpiPens is occurring at the same time that Mylan Pharmaceuticals is
exploiting a monopoly market advantage that has fallen into its lap… Patients all over the U.S.
rely on these products” (*Lim). An unnamed congressional staffer spoke with Inside Health
Policy on a matter concerning Impax Laboratories Adrenaclick, a product explained as nonequivalent to EpiPen not being covered by insurance companies. The staffer says “Companies
are finding ways of taking advantage of entry level barriers that aren’t supposed to be there for
competitive windfall… It seems like market failure, maybe it’s the FDA, maybe not” (*Lim).
Mylan’s Price Hike of EpiPens: Holding the Pharmaceutical Giant Accountable analyzes
the need for the trade commission to investigate antitrust law violations in relation to anticompetitive and exclusionary contracts. The article also offers recommendations of how
congress can approach the issue (Hadland). Mylan does not own a patent on the drug epinephrine
but rather on the auto-injector of the EpiPen. The efficiency and convenience of the auto-injector
also makes the Epi-Pen so valuable compared to tradition administration. Author Hannah
Hadland broadly suggests the FDA should “allow more competing auto-injectors on the market”
(Hadland). References for this include the FDA’s recall on Auvi-Q auto-injector, sighting
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deficiencies in the delivery methods of the drug. According to the article, the number of times
Auvi-Q auto-injector failed was about equal in ratio to the number of EpiPen failures, also
mentioning many of the failures could be due to operator error. Hannah concludes that the FDA
should allow more auto-injectors into the market as there is “no real fundamental differences”
and then way things stand the FDA is only encouraging Mylan’s price gouging (Hadland).
Lowering the standards for FDA acceptance on auto-injectors is a potential option. However, it
may be even more beneficial to remove the prescription only requirement on the product, says
Hannah.
Several politicians presented more alternative options to creating competition for Mylan
Pharmaceuticals on the market. One group of bipartisan senators sought to explore if it would be
justified to include a drug on the FDA’s drug shortage list due to price hikes. In turn, resulting in
the FDA accelerating the approval process for more similar products on the market. In 2016,
Hillary Clinton pledged to hold pharmaceutical companies responsible through funding research
programs and requiring companies to justify their price tags. She called on Mylan to immediately
reduce prices, as there was no justification for the current costs (Durkin).
In 2018, Teva pharmaceutical was finally granted approval from the FDA on its generic
EpiPen product in limited quantities. These generic pens now can be purchased anywhere from
300 to 400 dollars in comparison to the name brand 600 dollars. The generic price tag remains
600% higher than the $50 price in 2007 (Kokosky). While not illegal for a company to get rich,
price gouging tactics are unethical, and the government has the responsibility to make live saving
medications readily accessible to those in need. Investors should consider the ethics of
companies they invest in, rather than continue to enable malpractice. CEO of Mylan, Heather
Bresch, continued to insist the company had increased availability of the product. She also
claimed the company made important contributions to society through its awareness ad
campaigns. In 2019 she stepped down from her position of CEO. However, the issues of the
scandal and rise in profitability numbers continue and the issue speaks for itself. Adding
competition to the market for EpiPens will eventually eliminate the ability to raise prices
unethically, however, the FDA has made this extremely difficult prior to Teva’s acceptance. The
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FDA easing necessary acceptance requirements, investing in other pharmaceutical companies to
ease the difficulty of entry, banning contracts such as pay-to-delay agreements, or simply
declaring the drug as non-prescription all would benefit the consumers in this monopolistic
market. Use the extract to show how Mylan was actually found guilty for lying about their margins, On September 21, 2016, Heather Bresch was sworn in to testify before the House Oversight and Reform
Committee. In her prepared testimony, Bresch said, “Looking back, I wish we had better anticipated the magnitude and
acceleration of the rising financial issues for a growing minority of patients who may have ended up paying the full [list]
price or more. We never intended this” (Lopez & Ramsey, 2016, para. 4). During further questioning, Bresch used poster
boards to show that Mylan makes a profit of $275 on each 2-pack of EpiPens with a profit margin of about $50 per pen.
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The low profit margin, she explained, was due to the number of middlemen involved between the list price and the profit
that Mylan gets at the end of the transaction. The committee members found the figures hard to believe. “If I could sum up
this hearing, it would be that the numbers don’t add up,” Rep. Elijah Cummings said toward the end of the hearing
(Ramsey, 2016, para 4).
Further attention was drawn to the fact that family had influenced the EpiPen markets. Democratic Rep. Tammy
Duckworth of Illinois, who had earlier written to the US Attorney General to question the EpiPen schools program, alleged
during her questioning that Bresch intentionally created a monopoly by using her mother’s influence to ensure that schools
across the country are required to buy EpiPens. Bresch repeatedly denied the allegations, saying suggestions that her
mother was involved in lobbying efforts are inappropriate (Radnofsky, 2016a). Bresch was also questioned about her
compensation which had increased from $2.4 million in 2007 to $18.9 million in 2015. Florida Republican John Mica asked
her about her compensation. “About $18 million,” she said, quietly. “Sounds like you’re doing pretty well out of this,” he
replies. Is that high or low for industry peers, he wondered. “It’s in the middle,” she says, also quietly (Radnofsky, 2016b,
para. 2).
Source: The Wall Street Journal
Bresch was questioned further on the price hikes by the committee. She responded by saying the company made
profits far less than what the list price of $605 might suggest. “We believe it was a fair price, and we now just lowered it by
half,” she said (Rockoff, Radnofsky & Hernandez, 2016, para. 3). “I am a very conservative and pro-business Republican,
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but I am sickened by what I’ve heard,” Rep. John Duncan (R-TN) said (para.5). Rep. Gerald Connolly (D-VA) said if he
relied solely on Ms. Bresch’s testimony, he would think “what humanitarians” those at Mylan are. “You virtually have a
monopoly, and used it to your advantage; but unfortunately, it is at the expense of people who need it” (para 6).
On September 26, 2016, the Wall Street Journal published a report revealing that the figures Mylan presented to
Congress as profits on the EpiPen included taxes applied at the statutory corporate tax rate of 37.5%, which was five times
more than Mylan’s actual overall tax rate of 7.4% for 2015. This means that Mylan’s profits on each 2-pack of the EpiPen
was $166, a figure that is 60% higher than the $100 and $50 per pen figure it earlier gave to Congress (Maremont, 2016b).
On October 7, 2016, Mylan agreed to pay $465 million to the U.S. Department of Justice to settle the allegations
made by senators and federal health officials that it overcharged Medicaid, the government assistance program for
low-income families, by wrongly classifying the EpiPen as a generic product instead of brand name to avoid additional
taxes (Walker, 2016). In its form 8-K filed with the Securities and Exchange Commission, Mylan stated that the settlement
did “not provide for any wrongdoing on the part of Mylan Inc. or any of its affiliated entities or personnel.” It also announced
that it expects adjusted diluted earnings per ordinary share (EPS) of between $4.70 - $4.90 as compared to the previous
full year guidance of $4.85 - $5.15 per share (US Securities and Exchange Commission, 2016)
Economic Standpoint and Profit Adequacy Amid Monopolistic Leverage

From an economic standpoint, the scrutiny of Mylan’s monopoly over the EpiPen market must consider profitability and the market mechanisms that influenced its pricing strategies. Mylan’s substantial growth over the decades, paired with its 2007 EpiPen acquisition, marked the transition from a mission centered around affordable access to a more global and ambiguous commitment to setting new standards in healthcare. While the loftiness of its vision implies beneficence, the price escalation of the EpiPen raises the question of whether profit maximization overshadowed the company’s purported ethical compass.

Mylan’s monopolistic hold on the EpiPen market in the United States, facilitated to an extent by the regulatory environment of the FDA, became a source of immense profitability. The rejection of competitor products and the complexities of bringing a rival auto-injector to market cultivated an environment where Mylan’s pricing decisions faced little opposition. The case studies suggest that Mylan’s margins on the EpiPen were indeed substantial, contributing significantly to the company’s bottom line. Europe’s multiple producers of epinephrine auto-injectors stand in stark contrast to the American landscape, where Mylan enjoyed uncontested economic leverage—a gap that the FDA’s stringent approval process helped to preserve.

The interplay between Mylan’s monopoly and FDA regulatory action is critical. The hurdles faced by potential competitors, such as recall of competing products and rejections of entry bids by the FDA, highlight structural impediments to market competition. While the safety of the public is non-negotiable, the equivalence or adequacy of competing auto-injectors appeared to become secondary to the more pressing issue of accessibility and affordability, exacerbated by Mylan’s aggressive pricing.

Mylan’s use of tactics like ‘pay-for-delay’ and the questioning of its EpiPen school program’s ethics further underline the discrepancy between public service and self-interest. Political interventions to address the prospect of price gouging indicated an understanding that regulatory measures could serve as effective deterrents to economic exploitation. Proposals ranged from expedited FDA approvals for generic products to fundamental changes such as eliminating the prescription-only requirement for EpiPens—each with implications for competition and pricing.

Upon investigation, Mylan’s professed profit margins from the sales of EpiPens, as presented to the House Oversight and Reform Committee by CEO Heather Bresch, came under skepticism. Not only did law enforcement officials challenge the veracity of these figures, but subsequent disclosures revealed that Mylan had significantly understated its profit margins by including taxes at the statutory corporate tax rate, rather than the substantially lower rate they actually incurred. Further, the $465 million settlement for wrongly classifying EpiPen as a generic to dodge higher rebates to Medicaid exemplified a corporate maneuvering to retain high profitability at the expense of ethical practice and societal expectations.

Thus, in the context of Mylan’s history, mission, and vision, the surge in EpiPen’s price and the observed monopolistic dominance—which crowded out competition and led to public outcry—reflect a breach of both economic equity and the company’s purported ethical framework. The economic adequacy of Mylan’s pricing strategy, which raised profitability while arguably neglecting the affordability for those in dire need of EpiPens, stands at odds with the initial mission statement to “help people…gain access to affordable medicine.” The literature therefore suggests that from both an economic and ethical standpoint, Mylan’s pricing of the life-saving EpiPen was neither adequate nor justifiable, inciting valid controversy and regulatory action.
Write it again but include numbers such as dates and prices or percentages and remember to connect it with the prompt: To what extent has the exorbitant price of Epi-pens been ethically and economically adequate?
To what extent has the exorbitant price of EpiPens been ethically and economically adequate?

From an ethical and economic standpoint, the reasons behind Mylan’s significant increase in the price of EpiPens—which surged from around $50 per pen in 2007 to a list price of approximately $600 for a two-pack in 2016—invite critical examination. Economically, while higher prices can correlate with increased company profits, suspect in Mylan’s case is whether the monopolistic pricing was necessary or justifiable given the actual production and distribution costs. Additionally, the ethical implications of a life-saving medication becoming less accessible to those in need puts the adequacy of such a pricing model into question.

Mylan’s monopolistic standing was supported in part by the FDA’s regulatory environment, which indirectly contributed to Mylan’s control over the EpiPen market. Between rejecting potential competitors and adhering to stringent approval processes, the FDA played a role in fortifying Mylan’s market position. The lack of competition in the US, contrasted with Europe’s eight EpiPen producers, illustrated the disparity between an open market and a monopolized one. Yet, the level of profitability remains the central concern; Mylan’s CEO Heather Bresch presented to Congress a profit figure for a two-pack of EpiPens around $100, a number later contested and revealed to underrepresent true profits by as much as 60% when tax rates were appropriately calibrated.

Further complicating matters, Mylan engaged in strategies like ‘pay-for-delay’ to prevent the appearance of generic competitors such as Teva’s version of the EpiPen, which was delayed until 2018. From a market perspective, Mylan’s settlement in October 2016 for
$465 million regarding Medicaid misclassification highlights both the economic and ethical impropriety at the core of Mylan’s pricing strategy. By classifying the EpiPen as generic rather than as a brand-name product, Mylan avoided paying higher rebates, a maneuver that contributed to its ability to maintain artificially high margins at the expense of a government program designed to aid low-income families.

Economic profiteering at this level suggests a clear departure from Mylan’s original mission of ensuring affordable access to medicine. Increased scrutiny revealed that Mylan’s profit on each EpiPen was significantly understated in their testimonies before Congress. When taking into account Mylan’s actual overall tax rate of 7.4% in 2015 instead of the 37.5% statutory corporate tax rate presented, the profit per two-pack of EpiPens was closer to
$166, not the $100 initially claimed. This revelation indicated a 60% disparity in reported profits, raising substantial questions about the economic rationale behind the company’s pricing model.

In light of these factors, one must consider whether the increased price of EpiPens has been ethically or economically adequate. Ethically, the pricing actions of Mylan conflicted with the company’s own stated mission to prioritize people over profits. Economically, while Mylan indeed profited from its monopolistic stance, the adequacy of such profits comes into question when one considers the impact on affordability and access to essential medication.

Political efforts to address this issue have varied, ranging from proposed legislation aiming to enhance market competition to public calls by figures such as Hillary Clinton for accountability and fair pricing in 2016. Yet, even with the eventual introduction of a generic EpiPen by Teva, the price remained 600% above the 2007 figure, casting further doubt on the justification of Mylan’s pricing strategy from both an economic and moral perspective.

The extent of the ethical and economic breach is perhaps best encapsulated by the public and regulatory backlash that Mylan faced. The