Pricing the Epipen: This is Going to Sting

Abstract

This case examines the public controversy that erupted over the increasingly high price of EpiPens. Mylan Inc. (Mylan), a generic drug maker, bought the EpiPen product line from Merck in 2007. Since that time, the company both invested in marketing to raise awareness for the drug and dramatically increased the price, lifting it from $100 to $600 per two pack in the U.S. In 2016, simmering consumer anger about the high prices of pharmaceutical drugs finally reached a boiling point and a media firestorm ensued. The case challenges students to think about the role of fairness in pricing. How can Mylan justify the dramatic price increases? How can it justify the variation in prices across countries, as an EpiPen is priced at an equivalent of $85 in France? The case challenges students to think about how they would handle a public controversy. The EpiPen case is well suited for students in MBA, MBA for Executives, and executive education programs. For MBA students, it can be placed in first-year marketing, pricing, or marketing communications courses. For executives, it can serve as a vehicle to discuss both ethical issues of pricing and how to handle a public controversy. Excerpt UVA-M-0915 Rev. Dec. 6, 2017 Pricing the EpiPen: This is Going to Sting The headlines were not exactly what Heather Bresch, CEO of Mylan Inc. (Mylan), was hoping to see. The New York Times read, “EpiPen Price Rise Sparks Concern for Allergy Sufferers,” and the Washington Post read, “How EpiPen's Maker Raised Prices, and Hackles, So Much.” Forbes and the Los Angeles Times signaled that the business might face even broader scrutiny with their articles titled “CEO of EpiPen Maker Mylan Sees 671% Compensation Increase in 8 Years” and “Another Reason to Hate Mylan, which Jacked up the Price of Life-Saving EpiPens: It's a Tax Dodger,” respectively. As if the media attention was not enough, the government was now getting involved as well. Bresch had just received inquiries from several U.S. senators demanding to know more about how pricing decisions were made. Senator Chuck Grassley, the Republican chair of the U.S. Senate Committee on the Judiciary, wanted to know how Mylan could justify its price increases and what the company was doing to defray the costs of EpiPens for those patients who needed financial help (Exhibit 1). This governmental scrutiny was both a business concern and a personal one for Bresch, as her father, Joe Manchin, was a U.S. senator. Bresch did have at least one defender in Martin Shkreli, former CEO of Turing Pharmaceuticals. Shkreli faced a similar media firestorm the previous year after dramatically raising the price of Daraprim, a medication used to treat malaria and HIV, from $ 13.50 to $ 750 per dose. Shkreli defended Mylan's price increase for the EpiPen, arguing that as a generic drug maker, the company earned a relatively low 8.9% net profit, so it was not gouging consumers. He further noted that insurers should think of a $ 300 EpiPen as a good deal when compared to a $ 20,000 trip to the emergency room. Given Shkreli's general infamy and the fact that eight months prior he was federally indicted for securities fraud, it was not clear whether his support helped or simply exacerbated the problem. . . .