Friday, August 26, 2016

You're Not Actually Angry with Mylan for Raising the Price of the EpiPen

What am I talking about? Of course you're mad at Mylan! You’re so pissed you can’t see straight! How dare they charge over $600 for a two-dose EpiPen kit? They have obviously succumbed to Corporate Greed over the needs of every poor child in America with severe allergies! They don’t care if people die, as long as they get paid!

Well, all of that may or may not be true. But what you’re missing is, it’s not really the point. People get mad at Big Pharma and then say “See! Look at how the ‘free market’ serves corporations over the little guy! Let's force them to lower prices! We need more regulation and we need it now!” This is a big fallacy. The point is, in a system that was actually run by the free market, we wouldn’t have to regulate Mylan. In such a system, Mylan, or any company that chose to sell their products at too high a price would quickly become irrelevant.

In case you’re still angry at the market, wake up. Mylan is not competing in a free market and never has. It cost them billions of dollars to jump through the FDA’s regulatory hoops, and they’re overjoyed if it costs the next company behind them even more.

This isn’t just hypothetical. There are plenty of other companies willing to package epinephrine, if they could just get permission to do so. But they can’t. Mylan has a government-protected monopoly, and thus has the ability to raise prices and charge huge margins. Some would say they're acting irresponsibly, some would say they have the fiduciary duty to their shareholders to charge as much as they can to cover the real costs they incurred to get where they are.

But why did it cost them so much? Epinephrine is a well-understood and safe drug that costs pennies a dose. Mylan’s innovation was its EpiPen delivery system, not the drug it contains. OK, so how about a different injection device? Heck, a simple syringe with the dose pre-measured? Nope. Both recently rejected by the FDA.

What does regulation like this actually accomplish? Whom does it serve? For one answer, look at who funds the lobbyists to keep it in place. It might surprise you to know that those pushing for it the hardest are also those complaining about it the loudest. That’s right, Big Pharma.

“More regulation” isn’t a gun you can point at corporate greed and shoot morality bullets. It is the power of the state leveled at everyone, even those—no, especially those—who aren't yet in the market. Big businesses, already receiving revenue and using economies of scale, can usually throw enough resources at the problem to be compliant. Small businesses cannot, and thus they never get to compete. If they did, I promise you wouldn’t care if Mylan raised its prices ten- or even a hundredfold, because there would be plenty of cheaper alternatives, and Mylan would have priced themselves right out of the market.

That’s right, the market. It’s a word that means you and me—anyone who wants to buy. And when we have the liberty to do so—in other words, when there’s a free market—no one can price-gouge without someone else quickly stepping in to serve those in need. As is so often true in economics, what is seen—in this case, the good of regulation—must be balanced against what is unseen. Here, that is the good of competition forcing prices down, which, since it is prevented from coming into existence, remains merely hypothetical.

You aren't angry at Mylan for raising prices. You're angry at the FDA and those who make it impossible for Mylan’s competitors to serve you. You're angry at politicians who take campaign contributions to increase the regulatory burden, and you're angry at bureaucrats who leave government jobs after 10 years to accept a $500,000 salary from the companies they used to regulate. You're angry at the whole system that allows such corruption to flourish. Be angry at Mylan, if you must, not for raising prices, but yes, for funding policies and politicians that close the doors to innovation.

But mostly, be angry at yourself. When the price of live-saving technology goes up, it’s your tax dollars at work.

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