Its a warm, sunny summer day and the family is loaded in the car for a long-

awaited outing to the zoo. The three-year-old is excited out of her mind to see the
newest member of the zoo, a baby elephant. While being loaded into her stroller in
the zoos parking lot, the little girl is stung by a bee. She has a life-threating allergy
to the bee stings, but thanks to a quickly administered dose of EpiPen, she recovers
and enjoys the day at the zoo.
EpiPen, distributed by Mylan pharmaceutical company, is an auto injector
that administers epinephrine to patients who have severe allergies to food, insects
or other allergens and counteracts the anaphylactic reaction. Despite its life saving
measures, EpiPen is under much scrutiny because of its recent 75 percent price
spike and another price increase expected this May, per Elsevier Clinical Solutions
Gold Standards Drug Database.
The EpiPen price jump is a perfect example of price elasticity of demand
(PED). PED is the responsiveness of the quantity demanded of the commodity to
changes in the price and includes multiple reasons like the existence, number, and
quality of substitutes. Below is the equation to find the PED of a given product. The
percentage change in the quantity demanded divided by the percent change in
price will equal the price elasticity of demand

The EpiPen lacks competition and has deficiencies in substitutions, placing

the market in the palm of Mylans hand. One reason for Mylans market control is
the PED of EpiPen equals a large share of the consumers total budget. The more
substitutes there are for a commodity, the more likely there will be an elasticity of
demand for the product, something EpiPen does not have. The EpiPen is inelastic
because, the large price increase results in only a small decrease in demand. This
can put consumers in a financial bind because they must have this life-saving
medication regardless of the cost.
The absence of substitutions, including a generic drug, gives Mylan a
monopoly on the epinephrine market. What is a monopoly and how can monopoly
situations be powerful in the market trade? The businessdictionary.com defines a
monopoly as the exclusive possession or control of the supply or trade in a
commodity or service which gives a company the ability to raise prices or excludes
competitors.
A Washington Post article about Mylan shares three factors that explains why
Mylan holds the monopoly power on the epinephrine. The first factor in Mylans
epinephrine monopoly is that EpiPen has absolutely no competition in the
marketplace. A few pharmaceutical companies have developed a substitute, but
none of the substitutes have remained on the market because of ineffective
autoinjectors, failure to deliver the correct epinephrine dose, and other major
deficiencies. These issues have forced the substitutions to be discontinued and
removed from the marketplace. Having a monopoly power gives a company or
supplier control over price bases on marketshare.
There are various barriers to entering the market such as, trademarks,
patents and the lack of substitutions. Patents protect a product for up to seven
years so others cannot copy the design. The auto injector part of EpiPen is patent
protected, which gives Mylan a monopoly on the epinephrine market. This patent
makes it difficult for substation products to enter the market and create competition
for EpiPen. Mylan has been able to raise prices over the last several years because
they are perfectly aligned with four EpiPen patents that do not expire until 2025
(Emanuel). The patents make it very difficult for other competitors to enter the
marketplace to compete with EpiPen. Without any competition or substitutions,
Mylan can continue to increase the cost of this life-saving medication.
In 2013 President Obama signed the School Access to Emergency
Epinephrine Act, the media referred this announcement as the EpiPen Law. This Act
is another reason the EpiPen has a monopoly. The Act requires all public schools are
required to keep epinephrine injectors on hand and have a trained tech to properly
administer the medication. Mylan jumped at the opportunity to become the official
sponsor of the school program and organized a national EpiPen4Schools campaign.
Airlines later followed the school law and required epinephrine injectors be on all
flights, giving EpiPen an even stronger hold on the market.
Having a monopoly of the marketplace and the ability to control prices.
Mylan increased the cost of the EpiPen 75 percent. The company continues to
modify the autoinjector pen to keep the patent, creating an entry barrier in the
marketplace and limiting competition.
Social and economic regulations on the EpiPen seems to have the general
publics interest in check. Other companies have created substitutions to compete
with EpiPen, but those products have failed and been taken off the market due to
safety concerns. The substitute drugs were unable to give the correct dose of
medication, were difficult to use and overall inferior to the EpiPen. The EpiPen is the
only epinephrine autoinjector to be approved by the FDA.
The price hikes of pharmaceutical drugs have been a hot topic in the media
recently. Pharmaceutical companies have been accused of only caring about
extreme profits, price gouging and straight out greed. These accusations lead to
questions regarding the social responsibility of the pharmaceutical companies.
Where should government principles on social regulations verses economic
regulations reside? Social regulations are aimed at restricting behaviors that
directly threaten public health, safety welfare, or well-being. The FDA is a key social
regulation agency controlled by the government to protect public safety and has
worked closely with Mylan to ensure the EpiPen meets all safety standards. An
economic regulation is a type of government regulation that monitors the conditions
of firms entering the industry and aims to regulate prices in industries considered to
be natural monopolies. The EpiPen is monitored and controlled by both types of
regulations.
Social and economic regulations on the pharmaceutical industry have both
hurt and helped consumers who need specific medications to have a better quality
of life. These medications must be properly tested before they can be placed on the
market, which takes a considerable amount of capital and time to ensure the
medication is effective, of the highest quality, and most importantly, safe for
consumers. A New York Times article, Jared Bernstein, gives a cost-plus pricing
strategy where the government allows drug companies a percentage of markup in
ensure their profitability, but helps consumers afford the medications they need
without price gouging. Price controls for mediations are essential and a duty of our
government to ensure the welfare of the citizens of the United States.
Considering these government regulations are in place, it is worrisome that
pharmaceutical companies can still monopolize an industry and provoke the high
cost of drugs. Because many pharmaceutical companies, like Mylan, have lasting
patents on products, there are limited substitutions available which creates a
monopoly in the marketplace. The FDA has a social obligation to strategize with
pharmaceutical companies to develop a reasonable pricing strategy. Currently,
there is little to no competition for new drugs entering the marketplace. The FDA
has been difficult to work with on approving generic substitutions for epinephrine,
according to multiple pharmaceutical companies that have created alternative
generic epinephrine autoinjectors and were denied or blocked by the FDA. The FDA
is creating monopolies in the marketplace which allows pharmaceutical companies
to drastically increase the price of these medications. There needs to be social and
economic regulations that limit companys profits, the ability to monopolize the
marketplace and prevent extreme price gouging in the pharmaceutical industry.

Work Cited:
Emanuel, Ezekiel. "Don't Only Blame Mylan for $600 EpiPens Fortune Insiders." Fortune
Insiders. Fortune Insiders, 08 Sept. 2016. Web. 12 Apr. 2017.
<https://insiders.fortune.com/dont-only-blame-mylan-for-600-epipens-6ad0065373e0>.

Johnson, Carolyn Y., and Catherine Ho. "How Mylan, the maker of EpiPen, became a virtual
monopoly." The Washington Post. WP Company, 25 Aug. 2016. Web. 12 Apr. 2017.
<https://www.washingtonpost.com/business/economy/2016/08/25/7f83728a-6aee-11e6-ba32-
5a4bf5aad4fa_story.html>.

Miller, Roger Leroy. Economics today: the micro view. 18th ed. Place of publication not
identified: Prentice Hall, 2015. Print.
Newman, Jonathan. "The Lack of EpiPen Competitors is the FDA's Fault." Mises Institute.
N.p., 24 Aug. 2016. Web. 26 Apr. 2017.

"Online Business Dictionary." Online Business Dictionary - BusinessDictionary.com. N.p.,

n.d. Web. 12 Apr. 2017. <http://www.businessdictionary.com/>.

"Regulatory economics." Wikipedia. Wikimedia Foundation, 23 Mar. 2017. Web. 12 Apr. 2017.
<https://en.wikipedia.org/wiki/Regulatory_economics>.

Solomon, Yoram. "The Other Side of the EpiPen Price Hike Story." Inc.com. Inc., 24 Aug. 2016.
Web. 12 Apr. 2017. <https://www.inc.com/yoram-solomon/the-other-side-of-the-epipen-price-
hike-story.html>.

Tara Parker-Pope and Rachel Rabkin Peachman. "EpiPen Price Rise Sparks Concern for
Allergy Sufferers." The New York Times. The New York Times, 22 Aug. 2016. Web. 12 Apr.
2017. <https://well.blogs.nytimes.com/2016/08/22/epipen-price-rise-sparks-concern-for-
allergy-sufferers/>.

"The New York Times Company." The New York Times. Ed. Jared Bernstein. The New York
Times, 29 June 2016. Web. 12 Apr. 2017.
<http://www.nytimes.com/roomfordebate/2015/09/23/should-the-government-impose-drug-
price-controls/drug-price-controls-are-vital-in-a-market-thats-not-free>.