EpiPen’s new lease of life a Mylan windfall


Mylan’s EpiPen could be used as exhibit number three in the case against the pharma industry. EpiPen has been the subject of substantial price increases as its market exclusivity neared an end and now costs more than double its 2012 price – and now that Teva's rival has been vetoed by the FDA Mylan may be free to keep it up.

While anger has focused on the practices of former Turing Pharmaceuticals chief Martin Shkreli and Valeant, Mylan deserves similar scrutiny for its steady markups on a life-saving medication for a condition estimated to affect one in 50 Americans. Other than public pressure, the Pennsylvania-based speciality pharma has little incentive to limit price increases, especially since its fourth-quarter 2015 EpiPen sales were viewed as disappointing.

No competition

EvaluatePharma’s analysis of US government national acquisition costs shows that adult EpiPen pack prices have climbed from an average of $113 in the fourth quarter of 2012 to $240 in the fourth quarter of 2015. Even if patients do not use them in anaphylactic episodes, their shelf life of 18 months requires occasional replacement; the company also recommends keeping multiple devices handy in the home, workplace, and other places that patients frequent, requiring the purchase of several at once.

Insurance coverage insulates patients from the full cost, of course – however, as a branded product, it will appear on higher tiers of many health plans, with higher patient cost sharing than generic drugs. It would be a situation ripe for price competition given blockbuster sales – it is by far Mylan’s biggest seller – but thanks to missteps by rivals EpiPen still rules the roost.

Sanofi, for one, abandoned branded epinephrine competitor Auvi-Q following a recall for inaccurate dosage delivery – losing an estimated €122m ($132m) worth of sales in the process. Teva, meanwhile, has had the right to launch a generic since June 2015, but last month received an FDA complete response letter, an event it disclosed two days ago – the terse filing said it will not launch until 2017.

Teva’s first-to-file status means that any other competitor cannot enter until Teva’s has been on the market 180 days. Thus, rather than seeing a typical erosion of sales Mylan could see its blockbuster numbers continue at least through the end of 2017.

Every last penny

Price increases as generics approach is a tried-and-true strategy of maximising pharma sales, and now Mylan is in a position where it can build on the nominal 15% hike of the fourth quarter – list price increases usually yield smaller net boosts in sales as payers negotiate lower rates.

When Mylan released its fourth-quarter 2015 earnings, Bernstein analyst Ronny Gal noted that flat EpiPen revenue of $254m, compared with a consensus of $299m, was a disappointing surprise, especially since Auvi-Q had been withdrawn. It may very well have been the case that payers were anticipating Teva’s entry, however, and driving hard bargains; Mylan acknowledged that the price increase did not stick.

The Teva threat, too, has disappeared. Until next year, Mylan representatives have absolutely no motivation to offer more generous terms as long as they know payers have no other alternative. Look for EpiPen price escalation to continue until there is further word on Teva’s resubmission. This could be a blessing for Mylan investors, but it cannot be good for patients or health care budgets.

To contact the writer of this story email Jonathan Gardner in London at jonathang@epvantage.com or follow @ByJonGardner on Twitter

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