Mylan’s Lower-Cost EpiPen May Not Hurt Drugmaker’s Sales Much

  • Company offers half-price generic after drug price firestorm
  • Drugmaker has said generic will make shot more affordable

Mylan Plans Half-Priced Generic Version of EpiPen

Selling a version of its market-leading EpiPen at half the price of the original may not hurt Mylan NV very much, according to analysts who track the company.

The drugmaker responded to outrage about price increases for the allergy shot by announcing Monday that it would introduce a generic version for $300 -- while also continuing to sell the branded product. Mylan gives away about half of the $600 brand-name price in rebates, discounts and fees. It may give up far less, as a proportion of the price, on the generic version, said analysts.

“Our initial take is that Mylan could still come close to our $1 billion” estimate of 2017 sales, said Andrew Finkelstein, an analyst with Susquehanna Financial Group. He said the move was a way to cut out-of-pocket costs for patients while minimizing the impact on the company, and predicted the program would “only modestly” impact revenue. 

It will also sell the generic directly to consumers, in some cases, which will further increase its profitability by decreasing the discounts and fees it pays, said David Maris, an analyst with Wells Fargo.

“It looks like Mylan might make even more money with this direct-to-consumer effort,” Maris said.

Pricing Details

Mylan said last week that it makes $274 on a two-pack of EpiPens that list at $608. The difference between the revenue and the list price comes from discounts and fees given to pharmacy benefit managers, insurers and distributors. Mylan spokeswoman Nina Devlin said the generic would be distributed through the “typical generics supply chain.” She did not clarify what that means for Mylan’s sales.

“That’s the area where there’s the least disclosures” of sales data, Evercore ISI analyst Umer Raffat said of the discounts applied to generic drugs. “No generic company provides actual sales of generics, they just give you total North American sales figures.”

Mylan has come under criticism from lawmakers and consumer in the last month over the price of the drug, after raising the treatment’s price by 400 percent since it acquired the rights in 2007.

“The real price savings will come when there’s other competition,” Maris said. “The problem is, there isn’t right now.”

Setting the Market

Meanwhile, by introducing its generic, Mylan will set the market price for subsequent competitors.

“Now that there’s a product on the market for $300, any generic that enters knows that that’s the new benchmark,” said Rachel Sachs, an associate professor of law at Washington University in St. Louis. “You have to come in under $300.”

Mylan’s control of the market has grown more powerful in the past year as other drugmakers have faltered in efforts to introduce or sell other epinephrine injectors. In October, Sanofi voluntarily recalled its Auvi-Q injector over concerns about suspected malfunctions in the U.S. and Canada. It was marketing the product with the closely held company Kaleo Inc. Four months later, Sanofi said it was ending the partnership, leaving Kaleo on its own.

A Kaleo spokesman said last week that the company continues “to evaluate timing and options for bringing Auvi-Q/Allerject back to market.”

In February, Teva Pharmaceutical Industries Ltd. said the U.S. Food and Drug Administration identified “major deficiencies” in its application for a generic version of EpiPen, without providing more details. The Israeli drugmaker said the product would be “significantly delayed” until at least 2017.

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