Just a few months ago, Mylan NV got caught in a net of its own making when it raised the U.S. list price for a two-pack of its Epipen to $608, a 550 percent increase over several years. The hue and cry on Capitol Hill and from angry patients with serious allergies was that Mylan was taking advantage of its near monopoly on the epinephrine auto-injector market.
Now that price is looking like a steal. Kaleo Inc. plans to relaunch its Epipen competitor, the Auvi-q auto-injector, Feb. 14 at a list price of $4,500. That’s not a typo.
Defending the pricing plan for Auvi-q, which is returning to the market after being recalled to fix a potential malfunction of its delivery device, Mark Herzog, Kaleo’s vice president of corporate affairs, told BioWorld Today that the list price – which is not a true gauge of the actual cost because it doesn’t reflect rebates, discounts and other pricing concessions – will allow the company to “absorb the cost of Auvi-q for patients who would otherwise not have access.”
In other words, Kaleo plans to compete with Epipen and its new authorized generic through a patient assistance program (PAP) – not on overall price. Herzog said Kaleo’s leadership team “believes that the most important price is the price to the patient.”
Thus, the privately owned company is touting its access program, which will give the product, free-of-charge, to patients who don’t have government or commercial insurance and have an annual household income of less than $100,000. The out-of-pocket cost for commercially insured patients will be zero, even for those with high deductibles. The cash price for other patients will be $365, so long as they’re not on Medicare, Medicaid or another government plan. Since PAPs are off limits for those with government coverage, Medicare and Medicaid patients will likely stick with Epipen or Mylan’s half-priced generic.
While zero out-of-pocket may sound like music to a patient’s ears, there are some discordant notes here. For instance, how big of a rebate will Kaleo have to offer to get its $4,500 auto-injector on formularies when Mylan has a well-known brand and now a generic at a fraction of that price? And do Kaleo’s executives really believe that patients, and lawmakers, are ignorant of the fact that the true price of a drug is more than the out-of-pocket cost?
High list prices, no matter how they’re negotiated, dig deep into everyone’s pocket, as they impact insurance premiums, the tax burden for government health programs and true competition. Had Auvi-q come in under the Epipen list price, it could have competed on formularies and in government programs, forcing Mylan to lower its price in the future. But now the only incentive for Mylan to rein in future list price increases for Epipen is public outcry.
There would be an outcry, especially since Mylan has lifted the curtain on what it pays to produce and market the product. In her testimony before a House oversight committee last year, Mylan CEO Heather Bresch explained that while the wholesale acquisition cost, or list price, of an Epipen two-pack is $608, Mylan gets only $274 for each pack. Of that, $100 is profit – $50 per pen. The cost of goods, which has doubled since Mylan acquired the product, is $69. (The drug itself only costs the company 25 cents.) The remaining $105 covers related costs such as the PAPs offered to other patients, lobbying efforts, school Epipen programs, awareness campaigns and R&D.
What Bresch revealed, and what thinking patients should have already figured out, is that drug companies aren’t offering all those PAPs out of the goodness of their heart. Those costs are factored in to justify ever higher drug prices.
There’s a lesson here for the biopharma industry, too. Drug companies need to understand that high list prices will inevitably dig into their own pockets, as every hike or breath-taking launch price erodes the reputation of the industry as a whole. And no expensive ad campaign or concerted lobbying effort will be able to undo that reputational damage.
It was out with the old and in with the new Tuesday as the 114th U.S. Congress gave way to the 115th. Among the new delegates taking their seats in the House were a few more doctors, a dentist and the head of a Texas company that commercializes medical-related technologies. And the Senate welcomed a member who has done a stint as an attorney for a major hospital.
The new members won’t be a novelty in a Congress that’s already home to more than a dozen doctors, nurses, a pharmacist and other health care providers. That’s a far cry from what it was in November 2001 when Sen. John Boozman (R-Ark.), an optometrist, first took his seat in the House following a special election. At that time, only a few doctors, a dentist and a psychologist were among the congressional ranks.
With health care at the forefront of national issues, Boozman told BioWorld Today that frustration is driving health care professionals from the practice of medicine into the halls of Congress with the hope that they can make a difference for patients throughout the country. For the most part, they come from small private practices, and they have experienced first-hand how well-intended legislation and regulations play out in real life.
“I think it’s just frustration. . . . Sometimes things can sound good, but you don’t realize the unintended consequences,” Boozman said in explaining the motivation for exchanging a stethoscope for the bedlam of Congress.
As a result, health care providers have made a difference by having their voices heard in congressional committees and on the floor of the House and Senate. Many of their colleagues look to them for explanations of how the system works, as well as advice in drafting legislation on health care issues.
By serving in Congress, doctors and other providers have stopped proposals that could have had serious impacts on patients. For instance, they spoke up loudly and authoritatively when Medicare proposed a nationwide “experiment” on the reimbursement of Part B drugs that are administered in a doctor’s office. The concern that the pilot program would shutter private practices, forcing patients to have to travel longer distances to more expensive hospital-affiliated services, forced Medicare to scrap its plans, which had been slated to take effect this month.
Health care professionals also helped shape and push through the 21st Century Cures Act in the closing days of the 114th Congress. But the work isn’t done. The 115th Congress will be tasked with passing drug and device user fee agreements before Sept. 30. It will face continued pressure to increase research funding at the NIH and to dismantle the Affordable Care Act, including the medical device tax. And it will grapple with controlling health care costs, including the price of insurance and drugs.
“Drug prices are a huge issue,” Boozman said, adding that Congress needs to make sure bureaucracy isn’t adding to the cost. Malpractice reform also could help, he said. Besides increasing drug and device prices, malpractice claims have left many counties in the country with no obstetricians, the senator noted.
While such issues impact drug and device makers as much as they do providers, representatives from biopharma and med tech have yet to seek a direct role in Congress. Instead, they seem to be content to speak vicariously through lobbyists, trade associations and campaign donations. However, industry could more effectively shed light on the health care issues facing the country and shape policy if it, like the medical practice, had a few of its own serving in Congress.