There has been much speculation as to the source of the recent spike in the price of EpiPens. EpiPens are auto-injecting syringes designed to deliver a specific amount of life-saving epinephrine to a person having a severe allergic reaction known as anaphylaxis. Without a rapid injection of epinephrine the person could die. In the United States alone, even with the availability of autoinjectors like the EpiPen, anaphylaxis causes approximately 500–1,000 deaths per year. While quick administration of epinephrine is imperative, injection of too much epinephrine into a person suffering from anaphylaxis may lead to dangerously high blood pressure, an uneven heartbeat, seizures, or other symptoms. With the injection of the appropriate amount of epinephrine and proper medical care however, the prognosis is good. While a dose of epinephrine costs mere pennies, autoinjectors like the EpiPen can cost hundreds of dollars. Autoinjectors take the guesswork out of epinephrine delivery, allowing a layperson to quickly deliver just the right amount of epinephrine, at just the right location.

Patents are Not the Problem

Since 2009, the average wholesale price of the EpiPen has increased by nearly 500%. Compounding the problem is epinephrine’s relatively short shelf life. Patients need to replace their EpiPens every year. While the EpiPen is protected by a patent, patents are not responsible for the recent dramatic price increase. The EpiPen sold for $57 back in 2007. Back then it was covered by the same patent that covers it now, but the price has jumped to more than $300 per autoinjector. Responsibility for the recent dramatic price increase in the price of the EpiPen lies with the government.

The Alternatives You Can’t Get

While the EpiPen is patented, there are several competitive autoinjectors. So why has Epipen’s maker, Mylan N.V., been able to increase the price of the EpiPen so dramatically? The problem is that the government is standing in the way of these competitive autoinjectors getting into the hands of the patients who need them. Adrenaclick is one alternative injector. In most states, pharmacies are legally allowed to offer patients cheaper generic equivalents of more expensive name brand drugs. That is not the case with EpiPens. If a doctor writes a prescription for an EpiPen, in most states the pharmacy is not allowed to offer patients the much cheaper Adrenaclick autoinjector. Teva Pharmaceutical Industries Ltd also has a competitive autoinjector. However, in March, the U.S. Food and Drug Administration (FDA) rejected Teva’s application to bring its competitive autoinjector to patients. But can’t companies just sell the inexpensive epinephrine in pre-filled syringes? Adamis Pharmaceuticals Corporation had hoped to offer pre-filled syringes of epinephrine which, while more difficult for a layperson to use than an EpiPen, would offer patients a much more affordable alternative. However, in June of this year the FDA rejected Adamis’ proposed pre-filled syringes, stating more data on patient usability and reliability would be acquired before Adamis can offer its inexpensive alternative to patients.

Pushing for Government Regulations That Benefit EpiPens

While the government has been busy shutting down EpiPen competitors, it has also been busy bolstering EpiPen sales. If you thought a regulatory monopoly was enough, think again. As a result of Mylan’s lobbying efforts, it was able to push through the School Access to Emergency Epinephrine Act in 2013, which provides money to states that require schools to stock epinephrine injectors. Back in 2010, the federal government changed its guidelines to begin recommending that epinephrine autoinjectors be sold in pairs. In response, Mylan went from selling one EpiPen at a time to selling EpiPens in packs of two. Mylan has also been engaged in funneling advertising dollars to snacksafely.com, which urges the FDA not designate epinephrine an “Over the Counter” (OTC) drug and which supports legislation that requires epinephrine be “stocked in ambulances and all places of public accommodation, like restaurants, cafeterias, malls, movie theaters – everywhere you currently find cardiac defibrillator AEDs.”

Rent-Seeking

Rent-seeking is increasing one’s own wealth without creating new wealth. Rent-seeking is often seen with companies spending money on lobbyists and giving money to politicians in an effort to impose governmental regulations on competitors, to increase the rent-seeker’s market share. Such efforts often result in a sub-optimal allocation of resources, punishing competitors and customers more than they benefit the rent-seeker. While Mylan, like most large pharmaceutical manufacturers, has spent millions of dollars on lobbyists and political campaign contributions, there is no evidence of any illegal quid pro quo. Mylan is simply acting in the interests of its shareholders. It is the system itself, not Mylan, that is corrupt.

The Solution

Patents are not the problem. Back in 2007 the patented EpiPen was selling for only $57. The reason the price of the EpiPen has nearly sextupled in price since 2007 has nothing to do with patents. Patents are the reason we have life-saving medical devices in the first place. Without the financial benefits afforded by patents companies would have no motivation to invest the millions of dollars necessary to develop new drugs and medical devices. The problem is a system of government that motivates companies to extract additional profits without providing anything in return. The solution to problematic governmental regulation is not more governmental regulation. Further restricting the free market by mandating the prices at which companies are allowed to sell their products will only result in even more regulatory inefficiencies. The solution is to move closer to a free market by removing governmental regulations and changing the system to reduce the massive financial motivations to rent-seek in the first place.