Guanuna

Mark Guanuna
ECON-2010-003-F16
EpiPen was discovered in the 1970s by Sheldon Kaplan, a Biomedical engineer. Mylan a drug
company hiked EpiPens price by very big percentage, usually 400 in 2007. This story of EpiPen
price increase has happened as a result of Americas drug pricing policies that are unique.
Millions of Americans rely on EpiPens when they have severe reactions.
There are reasons why the Mylan have skyrocketed the prices for EpiPens such that the other
companies may have failed to do. The following are the main reasons:
1. The Federal Government has tried to prevent competition. Mylan could hike up its
EpiPen prices since they faced no competition in the market place. Epinephrine has been
patented and has also been synthesized for well over more than a century. Across Europe
there are many competitors to EpiPen unlike U.S where competitors has been prevented
by FDA from entering the market hence they have succeeded.
2. The increase has been masked by the Insurance Coverage. Employers and insurers have
been negotiating with Mylan over the prices of EpiPen. Therefore the end users had no
idea about the increase in prices even to the extent of losing their insurance or increasing
deductibles. Mylan has also given consumers several coupons for co-payments on
commercial insurance.
Price elasticity of demand (PED) is the measure of the responsiveness of the demand after the
price changes (Carrier et al 120). It provides an exact calculation of the effect of price change on
quantity demanded. We would expect Mylan to experience perfectly inelastic demand. This is
because large percentage increase in price has resulted to no percentage change in demand
(Ep=0). Though the price of EpiPen has hiked for a very high percentage, the demand has still

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remained constant or the change in demand is insignificant. This is because, though some
families may not afford to buy EpiPen after its price hiked, measures are there to make sure
every home, school and grandmother house can afford at least three packs through switching
insurance plans.
Since in U.S there is no close substitute for EpiPen, any further increase in price of the product
will have no effect on change in demand. Since the price elasticity of demand for EpiPen is
perfectly inelastic, Mylan may keep on increasing the prices even further since the consumers
will have no any other option rather than buying their products (Glabau et al 350-357). FDA
turned down application of other two companies which wanted to sell competing devices. EpiPen
is also a powerful drug that relieves pain and its degree of necessity is very high hence Mylan
expects consumers to buy even at high price. Though FDA has the role of protecting the
consumers from dangerous drugs or fraudulent, EpiPen have generic and simple drugs that are
sold by many companies if not in an outopen form for self-administration.
Being the only company in U.S that is patented by the government, Mylan enjoys monopoly
power since it faces no competition in the market. Monopoly is a market structure where there is
only one seller or producer. This means that there is only a single seller in the market. Entry in to
such market is restricted as the costs are very high. Monopoly power on the other hand is the
degree of the price setting power that is held by the seller on the basis of its share in the market.
EpiPen enjoys an advantage of being monopoly power as it has all the rights and can freely set
its prices without considering the market competition.
Economic regulation is the prescribing of output levels and prices for entire industries.
Regulations that are simple may lead to even more competition which in turn increases

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productivity. The government through regulation bodies such as FDA reduces, removes and
simplifies restrictions on businesses. The American government seems very exceptional in
manner that it has no power towards the regulation of drug prices. Anti-Trust laws on the other
hand are government programs and policies that are designed to control monopoly growth and
promote competition, while Social regulations are targeted on restricting the behaviors that
would threaten the public health, well being or safety welfare directly (Viscussi et al 142). U.S
FDA may be given by the congress priority survey vouchers for organizations that may decide to
launch competitors only for single-source generics. With a very clinical trials high costs,
restrictive approval for promising drugs could likewise permit organizations to recover some of
their forthright expenses and generate income, while trying to last information on security and
adequacy. Another choice is to list even more medicines for use over-the-counter, which further
reduces the need for costly medicines.
It might be the ideal opportunity for the FDA to reevaluate some of its directions or regulations
which govern these notable, generic drugs in order to reduce the cost of approval and to
encourage competition. Though government regulations are very crucial, but pushing for reforms
will allow new competitors to quickly enter the market and hence help to maintain fair prices due
to fair competition. Barriers to entry should not be very high since this will contribute to
monopoly power and hence companies will be free to increase the prices of their products.

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Work cited
Carrier, Michael A., and Carl J. Minniti. "The Untold EpiPen Story: How Mylan Hiked Prices by
Blocking Rivals." (2016).
Glabau, Danya. "Pricing the EpiPen: Drug Prices, Corporate Governance, and the
Financialization of Biomedicine."
Viscussi, W. Kip, et al. "Deterring Inefficient Pharmaceutical Litigation: An Economic Rationale
for the FDA Regulatory Compliance Defense." Seton Hall L. Rev. 24 (1993): 1437.