Why the $600 EpiPen Costs $69 in BritainBy and
Wide gap in pricing shows flaws in both U.K. and U.S. systems
Government, competition keep lid on drug prices in Europe
The EpiPen allergy shot, enmeshed in controversy because it sells for almost as much as the latest iPhone in the U.S., costs less than its leather case in Britain.
The price of an EpiPen two-pack has surged to more than $600 in the U.S., sparking a political outcry. While the manufacturer, Mylan NV, says it takes home about $274, in the U.K. a similar pair of injectors costs the state-funded National Health Service 53 pounds ($69). The numbers highlight the stark differences in the way drugs are priced in the U.S. and Britain, where the government negotiates with pharmaceutical companies to limit costs.
“It’s really two extremes,” said Soeren Niegel, executive vice president of commercial operations at Danish drugmaker Alk-Abello A/S, whose Jext pen is sold in Europe but not the U.S. “The truth, I think, should be somewhere in the middle. In the U.S., there’s a fair point from consumers and legislators saying this is crazy.”
Fuel for Critics
In a hearing looking into EpiPen prices this month, U.S. lawmakers lambasted Mylan’s Chief Executive Officer Heather Bresch. The cost of drugs in America depends on a complex, splintered and opaque system where intermediaries negotiate on behalf of some patient groups, while others are left to bear the brunt of the highest prices. That’s led to political scrutiny of other perceived abuses from Valeant Pharmaceuticals International Inc. and former Turing Pharmaceuticals AG CEO Martin Shkreli.
Europe’s more affordable medicines are fuel for critics of the U.S. system. Mylan charges a sixth of American prices in other wealthy nations, showing that the EpiPen -- a decades-old adrenaline auto-injector that can be life-saving for people with severe allergies -- can be profitable at far lower prices, according to a Sept. 20 report from advocacy group Public Citizen. The cost for two EpiPens ranges from less than $100 in France to just over $200 in Germany. In New York City, a two-pack retails for $615 to $650, according to prescription drug-price tracker GoodRx. The product cost only $57 a shot when Mylan took over sales in 2007.
Even as Mylan boosted its gross profit margin on EpiPens in the U.S. to an estimated 75 percent last year from 57 percent in 2008 by raising prices, it had to cut them in the U.K. (the product there was sold under license by Meda AB until Mylan bought the Swedish drugmaker this year). “Each market has its unique considerations that may impact costs,” spokeswoman Julie Knell said in an e-mailed response to questions.
The U.K. government and the industry negotiate an agreement that sets a limit on the health service’s spending and requires pharmaceutical companies to repay any amount that exceeds the fixed cap. Most drugmakers go that route, which is how the price of EpiPen and its two local rivals was set, though there is a way to opt out as well. The government is considering new legislation that would align both branches of the system to control costs.
In the U.S., intermediaries such as pharmacy benefit managers play a significant role in deciding how much drugs will cost. Drugmakers say price increases fund rising rebates, or fees paid to those distribution middlemen, while the benefit managers say costs would be even higher if they didn’t negotiate discounts on behalf of insurers and employers. Yet not everyone is insured, or even well insured, sometimes leaving patients who can least afford it to shoulder the highest prices.
For more on how the price of EpiPen is set in the U.S., click here.
“The fact that this appears so obscene points to a much deeper problem, which is a healthcare system that thinks it’s okay to pay $600 when you don’t have to,’’ said Karl Claxton, a health economics specialist and professor at the University of York in England. “The U.S. health-care system doesn’t have a disciplined demand side. In many respects, I don’t blame the pharmaceutical sector.”
Not everyone agrees. Drugmakers are under the spotlight for the high prices charged for innovative medicines that require years of research -- not just older ones like EpiPen, whose active ingredient costs $1. Gilead Sciences Inc. came under scrutiny from two U.S. senators last year for prices of its hepatitis C drugs Sovaldi, with a list price of $1,000-a-pill, and Harvoni.
The costs of many drugs in Europe, on the other hand, have been under pressure. For instance the U.K.’s National Health Service pays about 48 pounds for two of Alk-Abello’s Jext injectors, down about 17 percent since 2013, according to Niegel. Jext first went on sale in Europe in 2011. Across the continent, average wholesale prices have slumped more than 10 percent over the past three or four years, squeezing margins.
“In Europe, it’s getting to the point where it’s simply not a sustainable business anymore,” he said. “So it has to go the other way.”
Some of the pressure stems from competition. While the EpiPen in Britain vies with Jext and at least one other product called Emerade from Valeant, the Mylan shots have faced a lack of rivals across the Atlantic as competitors suffered setbacks.
Valeant gave up on introducing Emerade in the U.S. in 2015 based on feedback from the U.S. Food and Drug Administration, it said in regulatory filings. Impax Laboratories Inc. faces manufacturing constraints to the amount of EpiPen rival Adrenaclick it can supply, it said in June. Earlier this year, a would-be generic competitor from Teva Pharmaceutical Industries Ltd. was delayed until at least 2017 over FDA concerns. And France’s Sanofi pulled its Auvi-Q injector from the market over concerns about suspected malfunctions last October.
The FDA is helping drugmakers including Kaleo Inc. get other products to the market, Douglas Throckmorton, a deputy director at the agency’s Center for Drug Evaluation and Research, said in prepared congressional testimony this month. Alk-Abello is also interested in selling Jext in the U.S. and has fielded questions from legislators, though the regulatory and investment requirements are potential hurdles, according to Niegel.
In the U.K., no patient would be shut out and unable to get an auto-injector because of price, said Amena Warner, head of clinical services at Allergy UK, a non-profit group. Prescriptions are free for children and students under 18, and most adults are charged 8.40 pounds.
“I’m amazed, absolutely amazed,” she said of prices in the U.S. “It must make the patients feel very uncertain and very frightened. Fortunately in the U.K., that’s not really an issue.”
— With assistance by Cynthia Koons, and Robert Langreth