Mylan may have violated antitrust law in its EpiPen sales to schools, legal experts say

Schools across the country keep EpiPens in their nurses’ offices in case a student has a severe allergic reaction. For years, Mylan Pharmaceuticals has been selling the devices to schools at a discounted price, giving them a break from rising costs. But the program also prohibited schools from buying competitors’ devices — a provision that experts say may have violated antitrust law.

Mylan’s “EpiPen4Schools” program, begun in August 2012, offers free or discounted EpiPens to schools. Over 65,000 schools receive free EpiPens through the program; an unknown number of schools buy the epinephrine auto-injectors at a discount. Laws in at least 11 states require schools to stock epinephrine, and keeping a stockpile is incentivized by federal law across the country.

As of last year, the EpiPen4Schools discounted price was $112.10, according to company documents. That is about a quarter of the cost charged to pharmacies at the time, according to data from Elsevier’s Gold Standard Drug Database.

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However, in order to qualify for that price, schools had to agree they would “not in the next twelve (12) months purchase any products that are competitive to EpiPen(R) Auto-Injectors,” the agreement stipulates.

A Mylan spokesperson said this requirement is no longer part of its program. STAT found such language on EpiPen4Schools order forms dated August 2014 and June 2015, and on one order form signed by a school district official in North Carolina dated April 28, 2016.

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Later, Mylan told STAT and Congress that the requirement was eliminated in July 2016. A link to the order form on the EpiPen4Schools website was removed on July 1, a Mylan spokesperson said. The form was publicly available on the website through late August, and removed during the course of STAT reporting. A Mylan spokesperson said that the order form should not have been available online after July 1.

The Mylan spokesperson added that there have never been purchase requirements to receive the free EpiPen auto-injectors.

In a statement, Mylan said “the program continues to adhere to all applicable laws and regulations.”

“It is illegal to issue a discount on the condition the customer not acquire a competitor’s goods — if the effect may be to substantially lessen competition,” said Herbert Hovenkamp, a University of Iowa law professor and antitrust expert.

At issue is the notion of an exclusionary contract, which requires a customer to promise not to deal with a competitor. Exclusionary contracts are a common tactic for keeping a lock on a market, Hovenkamp said.

But using such a contract while also having a dominant market share may hinder competition, which he explained can be an antitrust violation. Last year, EpiPen made up 89 percent of the epinephrine auto-injector market, according to IMS Health, a market research firm.

Schools might have to buy more auto-injectors in that 12-month window for a variety of reasons: they might use the auto-injectors and need to replace them, or the devices might reach their expiration date.

Earlier this week, Senator Amy Klobuchar (D-Minn.) called on the US Federal Trade Commission to investigate possible antitrust violations in the pricing of the EpiPen.

In response to Klobuchar’s letter, an FTC spokesperson said that “the Commission takes seriously its obligation to take action where pharmaceutical companies have violated the antitrust laws, and it will continue to closely scrutinize drug market competition on consumers’ behalf.”

The fact that Mylan used to have such a stipulation may still be problematic, said Harry First, a professor at the New York University School of Law, who specializes in antitrust matters.

“It’s like the bank robber saying ‘Don’t worry, we don’t rob banks anymore,’” First said. “But if you make such a change, it casts doubt on why you needed to have such a requirement in the first place.”

The inflation-adjusted list price of EpiPens has increased by about 450 percent since 2004, according to Elsevier data. That rising price has become an issue for schools. John Torre, public information officer for Fairfax County Public Schools in Virginia, said that the district is worried that the price of EpiPens sold through Mylan’s discount program might change.

Fairfax County Public Schools, Virginia’s largest district with over 180,000 students, orders about 1,100 EpiPen 2-Paks each year at the discount price offered by Mylan, Torre said.

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The district also receives about 400 EpiPen 2-Paks for free each year from the company. These agreements contain no restriction on a district purchasing auto-injectors from other companies.

Torre said that the district is “closely monitoring the Mylan situation” and “actively exploring alternative vendors to meet our needs for the annual supply of epinephrine.”

At least 11 states have laws mandating that schools stock epinephrine, according to the advocacy group Food Allergy Research and Education (which receives funding from Mylan). As of July 2016, all other states — except Hawaii — allow, but don’t require, schools to stock epinephrine that can be used for any student experiencing anaphylaxis.

This post has been updated to include comment from Mylan and from a North Carolina school district.

Correction: A previous version of this story included an incorrect timetable for the availability of the school contract online.