In 2016, an enormous spike in the price of EpiPen, a life-saving epinephrine auto-injector used in emergencies by people suffering from severe allergies, caused a massive scandal and numerous discussions. The manufacturer of the device, Mylan, confronted a public outrage and had to take measures to be rehabilitated in the eyes of society. This paper covers the legal and ethical issues of the EpiPen scandal and suggests alternative ways of dealing with the situation. The essay consists of two main parts: an economical approach to the situation and ways of dealing with it. The purpose of this paper is to analyze the company’s actions and its strategy for improving its reputation.
EpiPen is a brand name of a medical device used for epinephrine injections. The drug itself is very affordable in a non-EpiPen form. It is the specific delivery mechanism that makes the use of the medicine easier in an emergency and, thus, raises the value of the pens. EpiPen has been in the market since 1987, and millions of customers have been supplied with auto-injectors since then (Epinephrine Auto-Injector). However, in 2016 the company was accused of price gouging and violation of moral laws in the desire to make the business more profitable, which often happens when a manufacturer holds a monopoly.
An economic view on the problem
Firstly, it is vital to analyze the situation from an economic perspective. A price gauging means an increase in prices for goods and services above the reasonable level, in times of a crisis or in case of an emergency. It is generally prohibited, and many states have laws against price gouging, like ten or fifteen percent ceiling for price rise. However, the context of the situation is highly important, as some examples of price hikes seem shocking but are not considered as violation of the law. For instance, the increased cost of hotel rooms in high seasons is not price gauging in a legal sense. It is just pricing by season and demand, which is considered good business. The same principle applies to cinema, concert, and other events tickets. Charging unreasonably high prices when a natural disaster or an emergency occurred is a price gauging, though.
Considering the facts mentioned above, technically, a surge in prices in the EpiPen situation is not illegal. It is a consequence of Mylan becoming a monopoly due to the absence of competition in the niche. However, the moral aspect of the situation is dubious, since, judging by the product’s popularity, millions of people need the medicine for themselves and their children. Even though higher cost means higher profit and more supply during scarcity, EpiPen can be considered an essential commodity that can save the lives of people with allergies. Therefore, hiking up the price of an extremely cheap drug such as epinephrine, despite the convenient design, by 400 percent without even significantly enhancing the product is not ethical.
In a free market, prices are regulated by supply and demand, without governmental intervention. Hence, the corporation is not restrained in setting prices but selling goods above the equilibrium price results in a surplus and, consequently, a price fall. Although, being a monopoly, Mylan took advantage of its position and did not suffer from a significant decrease in demand, as direct substitutes from competitors were not available. Nevertheless, the law of demand still applies in this case because some people turned to epinephrine in forms of simple injections or had to discontinue the use of EpiPen at all.
Alternative ways of approaching the EpiPen situation
The lack of competition has an unhealthy impact on the long-present business, as there is no incentive for new ideas and improvement. In the case of EpiPen, the company increased cost for their product without enhancing it, which led to social discontent. In fact, Mylan needed an alternative that would allow the company to increase revenue and remain ethical. A possible way of dealing with that could be improving the product’s characteristics, for example, increasing its shelf life or offering a more comfortable design for people who never used it before and children. Another way is launching a new product with similar functions, affordable for the general public. As to subsidizing the EpiPen consumers by charging more for other drugs, this approach does not seem reasonable. According to Willingham, EpiPen produced about 40% of the company’s revenue. To even out the income, prices of other goods would have to be increased significantly. Such a raise would result in a decrease in demand for Mylan products and search for substitute goods at rival companies.
In reality, Mylan implemented the following measures to stabilize the situation. The company offered the Access and Savings Programs for U.S. citizens, the Patient Assistance Program, and the EpiPen4Schools program (Epinephrine Auto-Injector). Apart from that, an authorized generic for EpiPen was introduced in the market, to improve access to epinephrine for patients. According to Mylan, the products are identical, and the only difference is the label of a brand name product (Epinephrine Auto-Injector). These alternatives are more ethical and better for public health because they give better access to the medication.
To sum up, the case study of the Mylan company was analyzed in this paper. A scandal related to their popular product EpiPen was a result of the price hike and unethical actions from the manufacturer’s side. EpiPen offers a quickly delivered dose of epinephrine, which can save people’s lives in critical situations. The surge in the price of the medication resulted in a negative reaction from society, and the company had to take measures to make the situation beneficial for both parties. A solution was found in establishing programs that improve accessibility EpiPen and launching an authorized generic.
Works Cited
Epinephrine Auto-Injector. Mylan Specialty L.P., 2020.
Willingham, Emily. “Why Did Mylan Hike EpiPen Prices 400%? Because They Could.” Forbes, 2016.