6 ms·

Someone might reasonably wonder why a federal task force is required to investigate "price gouging" for an item that contains under $10 of materials and is not

Someone might reasonably wonder why a federal task force is required to investigate "price gouging" for an item that contains under $10 of materials and is not mechanically complex. Why wouldn't an entrepreneur simply introduce a competing epi-pen design and bring it to market for $300 (for example) and undercut the price being charged by Mylan? We're told to hate the Martin Shkrelis of the world, and to resend the Mylans, but the truth is that our system prevents price competition because it is designed to protect established firms. This is why many established firms and "industry leaders" strongly supported the affordable care act.

Lambdanaut 10y ago
But to be clear, it was the established firms that designed the system to protect established firms.
ryguytilidie 10y ago
For anyone as confused as I was, I'm presuming that, Michael Skakels=Martin Shkreli?
- jo6gwb 10y ago
  My understanding as well, though it took a moment.
  - grandalf 10y ago
    Oops, that is among the more amusing typos I've committed :)
clavalle 10y ago
The government has created a moat for the current pen through regulation, particularly the extensive testing needed to bring it to market as a medical device whom people's lives depend on it delivering the right dosage with a low failure rate. This creates something of a small granted monopoly. It makes sense for the government to step in when something goes wrong. There are lots of theoretical arguments for a freer market that may drain that moat and allow competitors to quickly react to gouging but the reality is that consumers don't have a great way to test things like epipens and a market trial and error approach seems a little barbaric.
- dleslie 10y ago
  Seems to me that less testing is necessary for an established product. Are there patents involved?
  - grandalf 10y ago
    https://www.google.com/patents/US20050273054 https://www.google.com/patents/US20050273054
  - maxerickson 10y ago
    Sure, any company wishing to enter the market can use the expired patent as a reference.
    - dleslie 10y ago
      It looks like there's a minefield of patents granted post-1995[0]; and so which enjoy a 20-year term of protection. I can't see why any protection is necessary. 0: https://news.ycombinator.com/item?id=12344059 https://news.ycombinator.com/item?id=12344059
  - clavalle 10y ago
    Even if previous designs are followed, there are questions of materials and construction that need a significant amount of testing.
- grandalf 10y ago
  > a market trial and error approach seems a little barbaric. The average American earns less in a week than the cost of one epi pen. No, "nonfarm" statistics don't apply since people who work on farms still need epi pens. > It makes sense for the government to step in when something goes wrong. What has gone wrong in this case? The protected cronies of regulators are making a tidy profit after spending years cozying up, making political donations, and building a revolving door between industry and government. In actuality, in this case everything has gone abundantly right for regulators and firms. The task force will likely warn them that they should have just been satisfied with $350 per pen to avoid the bad press.
maxerickson 10y ago
There's a $150 alternative available. http://www.goodrx.com/adrenaclick http://www.goodrx.com/adrenaclick
- jea 10y ago
  But they don't offer it in a dosage appropriate for young kids (0.15mg) like Epipen Jr.
  - maxerickson 10y ago
    On the page I link, I'm able to click the dropdown menu by the dosage and select 0.15 mg.
- vonmoltke 10y ago
  It's an alternative that a) requires a doctor to specifically prescribe and b) is not covered by most insurance plans. There is a good reason the articles on this subject are saying there are currently no alternatives, since there were drop-in replacements until earlier this year.
  - maxerickson 10y ago
    It's still obviously a reasonable substitute for (at least some) patients with out of pocket costs above $150 for Epipens. I do understand that people are concerned about the different usage instructions (for example the school nurse not realizing it needs to be used differently) and that doctors may be hesitant to prescribe it. The thing I think is really interesting about the $150 generic Adrenaclick is that it puts some sort of ceiling on the regulatory costs and costs imposed by the other players in the health system. The Mylan CEO did an interview this morning where they hand waved and equivocated and so on, but it's clear enough (based on availability of a $150 substitute) that they are setting the price based on their advantageous position in the market. I don't see any reason not to call them out on any BS where they try to deny that.
vibrio 10y ago
First: I don't disagree with you about price gouging and the need for a solution. i spend time awake at night thinking about it. Considering COGS in Biologics drugs pricing is a logical fallacy. The $10 is irrelevant. You have to amortize in all the time, and expenses required to establish a sterile fill and finish facility, or the required capacity of a new product in an existing facility. A reasonable accountant would also probably throw in some of expense for the patent lawyers generic firms have in legion, or R&D pharma has. Maintain a large amount of sterile injectable manufacturing capacity at "drop-of-the-hat" availability to absorb/profit from such market fluctions at low pricing? Not a business model anybody would fund, or would keep someone employed in pharma. Does that justify the new price, probably not. Does it make a $300 pen a great business plan? Probably not. Hopefully that changes as the parasitic business models of the Valeants and Skrelli's of the world are receive due scrutiny.
- grandalf 10y ago
  Your point about R&D is valid, but in this case epi was first synthesized in 1895 and the R&D cost has long since been amortized and the IP is in the public domain. http://www.patent-invent.com/adrenaline_patent.html http://www.patent-invent.com/adrenaline_patent.html This article suggests that it was in fact a very shrewd business plan: http://www.bloomberg.com/news/articles/2015-09-23/how-marketing-turned-the-epipen-into-a-billion-dollar-business http://www.bloomberg.com/news/articles/2015-09-23/how-market...
  - vibrio 10y ago
    The relevant IP isn't the active pharmaceutical ingredient but the formulation and delivery method, and that appears to be out to 2035. http://www.accessdata.fda.gov/scripts/cder/ob/results_product.cfm?Appl_Type=N&Appl_No=204200 http://www.accessdata.fda.gov/scripts/cder/ob/results_produc... http://www.accessdata.fda.gov/scripts/cder/ob/patent_info.cfm?Appl_type=N&Appl_No=204200&Product_No=001 http://www.accessdata.fda.gov/scripts/cder/ob/patent_info.cf... I agree it's a good business plan as a solo participant in the market, but as a second or third entrant, probably less so-- depending on IP around the formulation and delivery method. With the number of company with discontinued products in the Orange book, i suspect there is some economic burden. that said there seems to be therapeptic equivalents available http://www.parsterileproducts.com/products/products/adrenalin-injection.php http://www.parsterileproducts.com/products/products/adrenali... so unless there is collusion, or a supply constraint, i'm not sure why the price will stand in the long term. (also is don't have expertise in this specific disease/drug so my comments could all be wrong). EDIT: i just realized i put int he IP links for PAR Pharma's product... i'm not sure what mylan's protection is but i have to get to work....)

Lambdanaut 10y ago

But to be clear, it was the established firms that designed the system to protect established firms.

ryguytilidie 10y ago

For anyone as confused as I was, I'm presuming that, Michael Skakels=Martin Shkreli?

jo6gwb 10y ago
My understanding as well, though it took a moment.
- grandalf 10y ago
  Oops, that is among the more amusing typos I've committed :)

clavalle 10y ago

The government has created a moat for the current pen through regulation, particularly the extensive testing needed to bring it to market as a medical device whom people's lives depend on it delivering the right dosage with a low failure rate. This creates something of a small granted monopoly. It makes sense for the government to step in when something goes wrong. There are lots of theoretical arguments for a freer market that may drain that moat and allow competitors to quickly react to gouging but the reality is that consumers don't have a great way to test things like epipens and a market trial and error approach seems a little barbaric.

dleslie 10y ago
Seems to me that less testing is necessary for an established product. Are there patents involved?
- grandalf 10y ago
  https://www.google.com/patents/US20050273054 https://www.google.com/patents/US20050273054
- maxerickson 10y ago
  Sure, any company wishing to enter the market can use the expired patent as a reference.
  - dleslie 10y ago
    It looks like there's a minefield of patents granted post-1995[0]; and so which enjoy a 20-year term of protection. I can't see why any protection is necessary. 0: https://news.ycombinator.com/item?id=12344059 https://news.ycombinator.com/item?id=12344059
- clavalle 10y ago
  Even if previous designs are followed, there are questions of materials and construction that need a significant amount of testing.
grandalf 10y ago
> a market trial and error approach seems a little barbaric. The average American earns less in a week than the cost of one epi pen. No, "nonfarm" statistics don't apply since people who work on farms still need epi pens. > It makes sense for the government to step in when something goes wrong. What has gone wrong in this case? The protected cronies of regulators are making a tidy profit after spending years cozying up, making political donations, and building a revolving door between industry and government. In actuality, in this case everything has gone abundantly right for regulators and firms. The task force will likely warn them that they should have just been satisfied with $350 per pen to avoid the bad press.

maxerickson 10y ago

There's a $150 alternative available. http://www.goodrx.com/adrenaclick http://www.goodrx.com/adrenaclick

jea 10y ago
But they don't offer it in a dosage appropriate for young kids (0.15mg) like Epipen Jr.
- maxerickson 10y ago
  On the page I link, I'm able to click the dropdown menu by the dosage and select 0.15 mg.
vonmoltke 10y ago
It's an alternative that a) requires a doctor to specifically prescribe and b) is not covered by most insurance plans. There is a good reason the articles on this subject are saying there are currently no alternatives, since there were drop-in replacements until earlier this year.
- maxerickson 10y ago
  It's still obviously a reasonable substitute for (at least some) patients with out of pocket costs above $150 for Epipens. I do understand that people are concerned about the different usage instructions (for example the school nurse not realizing it needs to be used differently) and that doctors may be hesitant to prescribe it. The thing I think is really interesting about the $150 generic Adrenaclick is that it puts some sort of ceiling on the regulatory costs and costs imposed by the other players in the health system. The Mylan CEO did an interview this morning where they hand waved and equivocated and so on, but it's clear enough (based on availability of a $150 substitute) that they are setting the price based on their advantageous position in the market. I don't see any reason not to call them out on any BS where they try to deny that.

vibrio 10y ago

First: I don't disagree with you about price gouging and the need for a solution. i spend time awake at night thinking about it. Considering COGS in Biologics drugs pricing is a logical fallacy. The $10 is irrelevant. You have to amortize in all the time, and expenses required to establish a sterile fill and finish facility, or the required capacity of a new product in an existing facility. A reasonable accountant would also probably throw in some of expense for the patent lawyers generic firms have in legion, or R&D pharma has. Maintain a large amount of sterile injectable manufacturing capacity at "drop-of-the-hat" availability to absorb/profit from such market fluctions at low pricing? Not a business model anybody would fund, or would keep someone employed in pharma. Does that justify the new price, probably not. Does it make a $300 pen a great business plan? Probably not. Hopefully that changes as the parasitic business models of the Valeants and Skrelli's of the world are receive due scrutiny.

grandalf 10y ago
Your point about R&D is valid, but in this case epi was first synthesized in 1895 and the R&D cost has long since been amortized and the IP is in the public domain. http://www.patent-invent.com/adrenaline_patent.html http://www.patent-invent.com/adrenaline_patent.html This article suggests that it was in fact a very shrewd business plan: http://www.bloomberg.com/news/articles/2015-09-23/how-marketing-turned-the-epipen-into-a-billion-dollar-business http://www.bloomberg.com/news/articles/2015-09-23/how-market...
- vibrio 10y ago
  The relevant IP isn't the active pharmaceutical ingredient but the formulation and delivery method, and that appears to be out to 2035. http://www.accessdata.fda.gov/scripts/cder/ob/results_product.cfm?Appl_Type=N&Appl_No=204200 http://www.accessdata.fda.gov/scripts/cder/ob/results_produc... http://www.accessdata.fda.gov/scripts/cder/ob/patent_info.cfm?Appl_type=N&Appl_No=204200&Product_No=001 http://www.accessdata.fda.gov/scripts/cder/ob/patent_info.cf... I agree it's a good business plan as a solo participant in the market, but as a second or third entrant, probably less so-- depending on IP around the formulation and delivery method. With the number of company with discontinued products in the Orange book, i suspect there is some economic burden. that said there seems to be therapeptic equivalents available http://www.parsterileproducts.com/products/products/adrenalin-injection.php http://www.parsterileproducts.com/products/products/adrenali... so unless there is collusion, or a supply constraint, i'm not sure why the price will stand in the long term. (also is don't have expertise in this specific disease/drug so my comments could all be wrong). EDIT: i just realized i put int he IP links for PAR Pharma's product... i'm not sure what mylan's protection is but i have to get to work....)