EpiPen: A Case Study in what’s the Matter with Health Care
Americans throw away unused epinephrine auto-injectors worth more than $1 billion annually. Or maybe it would be more accurate to say that Americans waste more than $1 billion annually on $50 million worth of epinephrine auto-injectors that are discarded unused. The devices should only cost $20 a pair. So, why do they cost $608 instead? More on that below.
Severe allergic reactions can result in anaphylaxis, including skin irritation, hives and a person’s windpipe can even begin to swell closed. Children allergic to peanuts or tree nuts are especially a concern since their parents are not always there to supervise them. By some estimates, perhaps 4 percent to 6 percent children have some type a food allergy. Yet, the likelihood of children suffering anaphylaxis is low. Estimates vary, but a study from Washington State back in the 1990s found only 1 kid in 9,524 had an episode in any given year. A similar study from Minnesota found the rate was one in 1,400. The difference in the prevalence had to do with how strict a definition was used.
Although uncommon, on rare occasions anaphylaxis can turn fatal. Researchers in the U.K. claim that in any given year, the chance of a child with a food allergy dying of anaphylaxis is just under 1 in 300,000. Another study put the number in Britain at 1 in 800,000. That is not to suggest the risk in nontrivial; about 200 unlucky people in the United States die annually from Anaphylaxis. Most of them are adults — about two-thirds. The most common causes are reactions to medications.
When anaphylaxis occurs the treatment of choice is epinephrine. It’s not like in the movies where patients have a mere 10 seconds before slipping into unconsciousness. Anaphylaxis is usually much, much slower. I talked to one person who had an anaphylactic reaction after eating shellfish, while taking antibiotics and then going for a 7-mile run. Shellfish, antibiotics and exercise are all known risk factors or triggers. Over the course of an hour she became increasingly sick but still had to make her way back to her car. She had plenty of time to treat the condition, but lacked access to the drugs. She ended up going to the emergency room by ambulance.
Every year EpiPens costing roughly a $1 billion expire unused. You no doubt agree this is a waste, but I’m not suggesting no one should buy them. Quite the contrary. Everyone should have a generic epinephrine auto-injector in their medicine cabinet. They should be available over the counter (OTC). The FDA acts like the technology is as sensitive as an implantable defibrillator. It is not. The technology is simple. An epinephrine auto-injector is about as complicated as the internal components in a retractable ball point pen. However, regulations governing the distribution means only those people with known risk factors are willing to pay $608 for a twin-pack that expires after only a year.
Why is a 40-year old technology still so expensive? Much of the blame is due to the U.S. Food and Drug Administration and the way drugs are regulated in the United States. The backlog of generic drug applications awaiting the FDA’s approval is nearly 4,000 applications. Thus, competitors who want to enter the market cannot do so for several years. In addition, safety improvements made to the design of the EpiPen over the years can be patented. Although the initial patent (or patents) likely expired in the 1990s, a new patent was issued on some aspect of the EpiPen in 2005, which will not expire until 2025. The FDA will not approve a generic based on an earlier model, say a 1975 auto-injector design, if the currently patent holder has identified potential problems in the earlier design and incorporated safety features that boost efficacy or safety.
The epinephrine injected by the EpiPen is available in an ampule for less than $1. In theory any generic drug maker could merely apply to sell syringes pre-filled with epinephrine. But the FDA would likely reject that as less safe than the EpiPen.
Drug maker Mylan bought the rights to the (then) 30-year old epinephrine auto-injector in 2007. At the time, one pen sold for about $57. By August 2016, Mylan had jacked up the price to more than $300. A generic EpiPen that was to be sold by Israeli drug maker, Teva, suffered setbacks that will delay their product by a year. The FDA recently declined to approve Teva’s version until it resolved some concerns. A talking epinephrine auto-injector made by French drug maker Sanofi was recalled because a couple dozen of its units supposedly administered inaccurate doses. There is speculation that Sanofi may never return its Auvi-Q to the market.
To make matters worse, in 2010 the government decided one dose of epinephrine is not enough that for about 10 percent of anaphylaxis patients and advised people with serious allergies to have two EpiPens available at all times. Mylan took advantage of the government recommendation and now the only way to buy EpiPens is a twin-pack with a list price of $608. Families with serious allergies or asthma often have two EpiPens at work or school and two more for at home in case of emergency. A significant affordability problem is that epinephrine is unstable when exposed to heat and light. Thus, EpiPens expire after an expected life of only one year. Of course, most are never used before expiring. To not experience a life threatening allergic reaction is a good thing. But that also means patients are expected to throw out $1,200 worth of unused EpiPens every year and purchase new ones annually.
Doctors like to only prescribe what they trust. Many may not even know about the competing epinephrine auto-injector, Adrenaclick. According to Consumer Reports, a twin-pack can be purchased a Walmart for $145 with a GoodRx coupon. Unfortunately, regulations in most states prevent pharmacists from substituting the $145 Adrenaclick for the $608 EpiPen. Schools may not want parents to send their kids to class with an Adrenaclick because teachers and school nurses are used to the EpiPen. These are all reasons Mylan’s EpiPen enjoys an 85 percent market share. To get the cheaper version, patients must ask their doctors to prescribe the Adrenaclick or a “generic epinephrine auto-injector.”
Twenty dollars. That’s probably about how much a generic EpiPen twin-pack would cost if the FDA approved an over-the-counter version or a version pharmacists could dispense to patients without a doctor’s prescription. Greater access could potentially save lives by making epinephrine more widely available. An OTC version would also save Americans nearly $1 billion a year.
A longer version of this Health Alert ran at TheHealthCareBlog. A version also ran in Town Hall.
I just learned that EpiPen is over-the-counter in Canada, where it costs about $80 (US).
Are there any other brands for sale besides the EpiPen? If there’s a generic, I’d expect prices to be much lower. If there is no generic available, then $80 is probably about normal. About 10 years ago it cost ~$60 in the U.S. even thought it was by prescription only.
Hillary is having severe allergic reactions which makes her cough for long periods of time. It looks like she is going to hack up a lung. Trust me, Hillary isn’t throwing away any unused epinephrine auto-injectors because she is using them all. I suspect the Clinton Foundation is paying for them, illegally.
Hillary says she is allergic to the thought of Donald Trump. Knowing Hillary like I do, I think this might be just another of her never ending lies.
Hillary is allergic to telling the truth.
So why is a syringe loaded with epinephrine unsafe? And if so, then why are diabetics allowed to use them?
I can only speculate but I believe the thinking is that a pre-loaded syringe would be more likely to break while being carried. Also a patient may be less able to self-inject.
Maybe. But that has a simple work around as well. House the syringe in a disposable plastic tube. Readily available from lab suppliers. As to the self-inject issues from your write up that hardly seems to be the case. Rarely is the sufferer so far gone that it isn’t an option.
I agree. This is yet another example where the “perfect” becomes the enemy of the “good enough.” A generic auto-injector, Owen Mumford Autoject 2 Fixed Needle Injection Aid Device, is $33.
FDA should require distributors of the loaded syringe and the generic versions to include warning labels and notices about the risks of the “inferior” technology. Then let the aware buyer vote with his feet. Manufactuers can then compete on the basis of price and value. That is how market economies are supposed to work. The government sets the rules and makes sure they are fair — it doesn’t need to make choices on behalf of the consumer, or in some cases, in support of the producers…
And before long the imperfect technology would be improved such that there would be little difference.
More comments on the perfect being the enemy of the good, from Uwe Reinhardt…..
http://thehealthcareblog.com/blog/2016/09/04/on-the-wondrous-u-s-market-for-prescription-drugs/
I read Uwe’s post but I don’t know what to make of it. What exactly is his point? Is it that we shouldn’t blame the government for market distortions (often caused by government). And health care doesn’t always follow the laws of economics?
The example given generic ursodiol supposedly increased in price from $0.46 cents apiece to $5.10 despite 8 manufacturers. (Uwe insinuates that PBMs are complicit and keeping the rebates.) But when I look up the price, it is roughly $1.20 apiece for the 500mg at Walmart and $1.20 for the 250mg with a Goodrx coupon at Walgreens. Apparently, competition had some effect.
When the “middlemen” (PBMs) make more than the company selling the product you KNOW there is a problem. But as with anything else if you are paying for HC with someone else’s money – what do you care? The high deduct plans exposed what most of us suspected but still can’t believe is so bad.. the “pay or play” deals with PBMs and PHARMA are working in concert and against the ultimate consumer, the premius purchaser and the taxpayer.
Why doesn’t Devon do an article about that? Oh yea, he already did – but it was in FAVOR of PBMs as he thinks (somehow magically) they bring down the cost. They are doing exactly the opposite.
Dawn, you have my attention. I’d like to hear what you have.
Why don’t you write the article? Comments posted here frequently gather more attention than the main article.
Here was the last email I sent to Devon – last July (2015) and this was BEFORE I knew what the rebates are in this epigate scandal.
Mr. Herrick-
I’ve been following NCPA for many years as I was an early adaptor of health savings accounts also. I truly believe in consumer driven healthcare.
Something else I feel strongly about is removing the middlemen from the equation of provider and patient as there is NO VALUE added when they are involved (even though there are a lot of claims made to the opposite).
At our pharmacy we proudly sell prescriptions at a “cost plus” basis for those who do not have any drug coverage. The fact that we sell 90 day supplies of generic Plavix for $20 is almost incredible, but we do.
From your article about the PBMs its pretty obvious that they’ve snookered you (as they have with many others) to convince you that they are a necessary entity in our healthcare system at this point. To that I would say they are NOT neccssary as they operate their model with today’s technology.
I remember when (man I sound old) when some unions had Rx cards (they were a rarity) and we plugged in the information and that is how we charged the patient copays or other cost shares. The rest (if you can believe it) was billed out manually. Then we could actually “process” (modem out) to the insurance company to have them come back with a cost share (as they were constantly changing). The Rx card companies were basically used for processing information and made it easy for people to access/use their benefits so those without cards did at the time – send in arduous forms they submitted for reimbursement.
PBMs (as they started referring to themselves) then merged with manufacturers and then started enacting formularies and providing these solutions to employers, entities, etc. That may have provided a lot of value back then since the majority of the things that we used for common maintenance medications were branded Rxs and they were expensive. But with that they paid themselves “rebates” from the manufacturers and didn’t necessarily pass those on to the end customer (still happening today) but the rebate acted as an unofficial bribe for premier placement on formulary tiers or even to be on the formulary itself. Most HR people don’t know a lot about pharmacy and were probably relieved that someone was doing this work – so they let them and they didn’t seem to mind any (unneccssary fees).
Costs continued to escalate and PBMs had to provide more “value” to their customer so they started squeezing providers (not reducing their own fees – which I would argue continue to grow) and at that time either they merged/bought out a mail order pharmacy or started one and used that as another cost solution.
Patients were at first very hesistant with mail order (NEVER has there EVER been a study that shows patient prefer or even LIKE mail order), but patients realized if it was in their financial best interest (3 months of copays for 2 copays) – they would give it a try.
Do a quick google search of patient satisfaction for mail order and/or PBMs. Patients routinely are left without medication and/or (an even bigger problem to our health system) are automatically sent medications after they are no longer taking them and/or have even died.
Now with most classes of medicaions being a available in generic (or at least something in that class is) – I would argue the unnecessary money being extracted from the system by the (lack of value added) PBMs could go much farther helping people with actual healthcare – and even prescriptions themselves.
To have Express Scripts and Catamaran and even CVS/Caremark as high on the Fortune 500 list as they are now with their CEOs making the amount of money they are – its going to get to a tipping point where people start screaming for socialized (no profit in the system) healthcare. Greed is off the rails at this point.
I can tell you that 10% of the claims we run through we LOSE money! Can you believe that? I wouldn’t believe that. And I’ve worked with a government auditor who had the data to show what they were charged and what I was reimbursed and the “spread” the PBM made. Its outrageous. When I lose $20 on a Rx and they pay themselves $50 for the same Rx and I was the one who talked/counseled with the patient, offered other suggestions for otc therapies, etc – its so upsetting – pharmacies don’t even know where to start to combat this issue – so unfortunately even I as a “anti-regulatory” person have opted to go to the STate legislature and expose these practices (as they would NOT increase my reimbursement as I was paid at “mac” pricing – which is part of my “take it or leave it contracts). Enough it enough.
The business practices of PBMs make the mob look like a legitimate business model. At least with the extortion with the mob you got something – even if it was some protection. I have to sign a contract I can’t negotiate and take money below what it costs me to purchase and also as part of the contract there is a gag clause that I can’t even complain about it (isn’t that un-American?) Aren’t we allowed free speech?
Your article and seemingly respect for these organizations seems counter to the mission of the NCPA which I would have thought would be in support of transparency and mitigating things to thwart of MORE government regulation.
Your information seems a little dated also to use Zantac/Tagamet to go OTC. There have been plenty more OTC conversions since then. I would hope that you stop by your locally owned pharmacy and ask how they are doing at the moment and what obstacles to they see in terms of patient care (isn’t that is what healthcare is all about anyway?)
There is also plenty of information about (lack of) transparency with PBMs and their covert/predatory contracts. The Dept of Labor had a committee meeting addressing PBM business practices. http://www.dol.gov/ebsa/pdf/ACBalto061914.pdf. Particularly note a new revenue generator for PBMs – called “zero balance billing logic” – which I would thing NCPA would be adamantly opposed to since it encourages people to get to their deductible quicker (giving the money to the PBM). While I’m certainly a capitalist – the more greed in the system – again begs folks to start thinking of (hush)… price controls and government takeover.
For all the reasons above I would hope you reconsider your information about PBMs and do an update down the road for your NCPA loyalists.
Dawn Butterfield RPh
West Cocoa Pharmacy and Compounding
Cocoa, Florida
(As a side note to the ACA – generic prices are going up 1000-5000% overnight – not sure if you’ve looked into that….. Some people think they are partnering (silently) with PBMs to do this so the prices go up and people will have to once again use their benefits versus practicing consumerism in healthcare)
Dawn Butterfield
4:00 PM (7 hours ago)
to Devon.Herrick
Still like the PBMs now?
https://twitter.com/TruthRX/status/774055356213268481/photo/1?utm_source=fb&utm_medium=fb&utm_campaign=TruthRX&utm_content=774055356213268481
To see the graphic outlining who gets paid what in this epigate scenario.
And my question is – how much more effectively priced would Rxs be withOUT the middlemen of PBMs..
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“Dawn and others, I had earlier posted the site of physicians against drug shortages and a NYTImes editorial on that subject on THCB and I believe at this site as well. There was no response. I am not quite sure of the scope of the entities involved and their relationship to one another though I believe one has to do with hospitals and the other pharmacies. In the end, it appears both might be responsible for increasing costs and harm to our patients.
Perhaps more light can be shed on both entities. Below I provided the http for the group and an editorial along with a short blurb copied from the web site.
Stop Deadly Shortages and Skyrocketing Prices of Generic Prescription Drugs by Ending the Hospital Group Purchasing Organization (GPO) “Pay-to-Play” Scheme
Dear Friends, Colleagues, Patients & Fellow Citizens:
As medical practitioners and concerned citizens, we’re deeply anguished that millions of patients are suffering needlessly, and in many cases dying, because of unprecedented shortages and surging prices of generic prescription drugs. Most of the approximately 361 drugs* in short supply are sterile injectables administered in hospitals, outpatient facilities, and clinics. They include chemotherapy agents for ovarian, colon, bladder and breast cancer, leukemia and Hodgkin’s disease; anesthetics and pain relievers; antibiotics; IV nutrients for malnourished infants, and many other generics that have been saving lives for decades.
http://www.physiciansagainstdrugshortages.com
http://www.nytimes.com/2013/09/03/opinion/how-a-cabal-keeps-generics-scarce.html “
I have not studied group purchasing organizations (GPOs) in depth, but there are those who believe GPOs raise costs due to their anti-trust exemption. I talked to an entrepreneur at a medical device company who told me his product (which is superior to anything on the market) cannot get a toe hold in the hospital market because his is a small firm and his behemoth competitor has an 85% market share. The competing firm has signed sole source agreements. That basically guarantees small firms cannot enter the market.
Devon, did you take a look at their web site?
Dawn, thanks.
I think the intermediaries everywhere in healthcare are greatly responsible for high costs and I believe government actions permitted this to happen.
GPOs are important in Hospitals and I would believe what he is saying.
In the retail environment pharmacies belong to groups that together have managed care/PBM contracts and some have their own generic warehouses. Nothing strange about that other than some power in numbers for purchasing, but nothing is exclusive. As in retail we don’t write Rxs or dictate formularies and purchasing like they can do in a small closed system in a hospital.
In retail (which affects patients with every transaction and every medication they purchase), the entire game’s rules are set by the PBMs and they have hijacked the profession of pharmacy, steer business to themselves (like mail order) and will NOT be transparent as to how they make money no matter who inquires. Its no wonder they are all now on the Fortune 20 list.
I believe its a House of Cards that will eventually fall as in this Epipen situation – for them to take MORE $$ out of the system then the company actually providing the drug is ridiculous but shows to the level of greed that they’ve now build themselves to be on thinking each other is the competition.
Their real competition are educated payors who are sick of this game. See the Barons article sometime in August – there is a handful of very large corporations who simply want administrative contracts only and aren’t allowing any fuzzy math. The problem with that now however, the (list) pricing is all set knowing that 1/2 of it is rebated back. Something needs to stop there.
I would like to push back on this as I think Ms. Butterfield oversimplifies the issue.
First, particularly with respect to branded drugs, the attitude of the drug companies is that if the doctors prescribe the drug, the pharmacies have to carry it and the price is the price. The drug wholesalers and the largest retailers like Wal-Mart have little or no market power here. The wholesalers, for their part, earn an average pretax profit margin of 3% even though there are only three competitors. In the perfect drug manufacturer world, patients would pay little or nothing for their drugs while insurers and government payers would pay through the nose. The manufacturers don’t care about the cost of health insurance or the impact it has on employers’ ability to raise wages or the taxes we all have to pay to support Medicare and Medicaid.
As I’ve noted before, the PBM’s pass through all of their rebates to self-funded employers who want them to do that. The PBM’s are willing to accommodate their employer clients because they have four different ways to make money and they have a target amount they want to make from any given client. They don’t care which of the four buckets the profits come from. The four buckets are (1) administrative fees, (2) rebates from drug companies, (3) the spread between how much they pay for the drug and what they bill the employer / client, and (4) the profits they make from filling prescriptions for generic drugs through their mail order pharmacy. Without someone establishing a formulary, drug prices would be even higher than they are now.
The PBM’s will also tell you that rebates on any given drug can range from zero to more than 50% depending on whether or not there are any available substitutes, how effective the drug is within its therapeutic class, the availability of generic equivalents among other factors. There has been considerable consolidation in the PBM industry and the top three competitors – Express Scripts, CVS Caremark and Optum Rx have roughly 80% of the PBM market among them. Humana Pharmacy Solutions has an additional 10% share. If you look at their profits as measured by EBITDA per prescriptions, it averages between $6 and $7.
The bigger problem with the EpiPen specifically has more to do with FDA regulatory hurdles which make it more difficult than it needs to be for competitors to enter the market. That’s a separate issue that calls for a political solution.
Finally, I track the prices of the maintenance drugs that I take which I’ve gotten through Optum Rx since I retired at the end of 2011. Several have gone down in price since then. For the record, I get these drugs by mail and have been very satisfied with their service and reliability.
Starting January 1st of 2017, I will have the option of getting these drugs through my local Walgreens pharmacy for the same copay as by mail order. Walgreens and CVS seem to be doing quite well thank you very much. Supermarkets and big box retailers like Wal-Mart and Costco don’t have to make money from their pharmacies because they have lots of other things to sell in their stores and they view the pharmacy as a customer convenience. Independent pharmacies are in a tough spot though thousands of them are able to compete effectively by offering more personalized customer service and, sometimes, home delivery.