September 2, 2016
The 400 Percent Question: Why so few generic alternatives to Mylan’s EpiPen?
The exorbitant price of $600 for one pack of two EpiPen epinephrine auto-injectors sold by Mylan to treat anaphylactic shock triggered by life-threatening allergic reactions has become an issue of national interest. The problem for Americans has been the absence of a less expensive, FDA classified AB-rated generic alternative to EpiPen. Americans – those who need the medication and even those who do not – are rightfully outraged by the approximately 400 percent price increase for this drug-administering device since 2007. Some may even travel to Canada to purchase the product where a single EpiPen costs roughly $100. In France, the devices cost about $85 for a pair.
In response to increased media attention concerning EpiPens, the CEO of Mylan, Heather Bresch, appeared on CNBC last week claiming that the price increase was the result of a broken healthcare system consisting of layers within the distribution channel. While some may agree with her explanation, many others continue to exclusively focus on the high price of EpiPens with warranted anger, frustration and skepticism.
For some, questions about unlawful conduct and monopolization come to mind. While there has been considerable national discussion over the past week about EpiPens, a key question is not being addressed —why isn’t there real competition in the EpiPen product market?
A few years ago, this very issue came to my attention when reviewing the price of EpiPens. After further research, I had several questions, triggering a full review of the issues at hand, including:
- EpiPen pricing, including the failure of other pharmaceutical companies to introduce a generic alternative to the EpiPen;
- Legislation being proposed by Mylan to encourage the availability of EpiPens in public places; and
- Mylan’s shift from selling EpiPens in single dosage packs to twin dosage packs.
The legislation, which has been enacted, promised to enhance safety by ensuring access to the life-saving medication in schools and other public locations. In doing so, however, Mylan used the legislation to increase product demand while further substantially increasing sales by shifting away from a single dosage pack to a twin dosage pack – two EpiPens in a package each with the same expiration date. In the absence of generic competition Mylan has been able to legislatively increase product demand and essentially double its sales.
Are consumers being shortchanged by backroom deals?
In response to these market events, Motley Rice filed a Petition in the Supreme Court of the State of New York, New York County in June 2015 requesting access to a secret agreement that Mylan, through its predecessor King Pharmaceuticals, Inc., entered into with a generic manufacturer seeking market entry, Teva Pharmaceutical Industries, in April of 2012. The agreement settled a patent infringement litigation brought by King against Teva, which had sought permission from the FDA to manufacture, market and sell an FDA-approved generic version of EpiPen.
Our Petition alleges that Teva argued during the patent infringement litigation that its product did not infringe Mylan’s patent for several reasons.
- Teva’s generic relied on manual insertion of the needle into the patient.
- Teva’s product did not have a needle cover that locks in place as opposed to Mylan’s which requires the needle cover having a first locked retracted position.
- Teva’s product did not have energy released from the stored energy source in direct contradiction to the claims in the Mylan patent.
- Teva argued during a bench trial that the Mylan patent involved prior art references, or borrowed from a previously designed device, which it claimed invalidated the patent.
Why the Teva Device is so significant
Had Teva successfully brought its proposed FDA-approved generic to market, pharmacists would have been able to substitute the less expensive generic product when filling prescriptions for EpiPens, thereby significantly reducing the costs paid by consumers, insurers and health plans.
Our Petition alleges that shortly after trial in the patent infringement litigation, King and Teva quietly settled the action on April 27, 2012. As part of the settlement agreement, Teva agreed that it would not begin marketing a generic version of EpiPen until June 2015 – approximately three years later. The New York Times has reported that Mylan has taken full advantage of this additional period of exclusivity, raising prices from $265 for a two-pack to over $600 in the past three years, including two 15 percent increases in 2014.
Aspects of this agreement bear a striking resemblance to a prototypical anticompetitive “reverse payment settlement agreement” recently addressed by the U.S. Supreme Court in FTC v. Actavis, 570 U.S. __, 133 Sct. 2233 (2013). In Actavis, the Supreme Court held that a large, unjustified reverse payment by a branded company to a generic to delay market entry can constitute a violation of the antitrust laws.
While the agreement between King and Teva lapsed in June of 2015, Teva has not entered the market with a generic version of EpiPen. There have been media reports that Teva has purportedly been unable to obtain final FDA approval to enter the market because the FDA found “certain major deficiencies” in its Abbreviated New Drug Application necessary to obtain generic market entry.
These facts raise a number of questions which have not been answered. First, did Teva receive a large, unjustified reverse payment in resolution of the patent infringement litigation to induce it to stay out of the market until June of 2015? Second, did the parties quietly extend the agreement for another two years in light of Mylan’s success in reaping enormous profits from sales of EpiPens since the patent settlement agreement was entered? In other words, is Teva receiving payment not to use its best efforts to obtain final FDA approval to enter the EpiPen market? In sum, there are a number of unanswered questions – questions which could be easily addressed if the patent infringement settlement agreement and related documents were disclosed.
Finding Answers and Long-Term Solutions
King removed our Petition, seeking the secret agreement and related documents, from state court to federal court, delaying the proceedings. On Feb. 24, 2016, Judge Lewis A. Kaplan of the Southern District of New York concluded our Petition was improperly removed from state court. Further delaying our efforts to obtain these documents, that decision has now been appealed by King.
Although Mylan has now agreed to license an FDA-approved generic version of EpiPen that costs 50 percent less, this does not answer our questions nor does it address the fact that if Teva had been allowed to more timely enter the market there could have been substantial generic competition in this market resulting in prices well below those today. EpiPen consumers concerned by these events or those who believe they have been unlawfully overcharged should contact their local Congressional representatives to demand an official inquiry into all of these issues and demand disclosure of the underlying patent infringement settlement agreement. Access to cost effective epinephrine devices is simply too important, thereby warranting immediate disclosure of the secret agreement and any related documents.