Why do EpiPens still cost so much?
EpiPens are once again becoming a target for policymakers looking to solve one of American health care’s most egregious cost crises.
Several years ago, exponential price increases that were making it difficult for patients to afford the lifesaving medication drew widespread attention and intense public outrage. The company that makes EpiPens, Mylan, paid a nine-figure fraud settlement with the federal government and introduced a moderately cheaper version of the drug. This didn’t entirely solve the medication’s affordability problem — some patients are still paying in excess of $600 a year for epinephrine — but it did mean the cost of EpiPens stopped getting so much attention.
But that is starting to change. Lawmakers in Colorado are advancing legislation that would cap patients’ out-of-pocket costs for epinephrine, potentially saving families hundreds of dollars every year. Similar proposals in other states are starting to gain traction. Ultimately, experts say, Congress may need to impose a cap on how much patients pay for epinephrine — mimicking the step they took with insulin last year for people on Medicare.
As with insulin, which has recently seen dramatic price cuts recently after a prolonged advocacy campaign, a near-monopoly by Big Pharma led to EpiPen prices skyrocketing. Mylan hiked the price of a two-pack of EpiPens sixfold, from about $100 to $600, in a decade. Out-of-pocket spending doubled, as patients with serious allergies were forced to pay up in order to get access to a medicine that could save their life in an emergency.
In the past few years, new products, including a non-branded version of EpiPen sold by Mylan, entered the market. The hope was that the increased competition would bring prices down.
But in reality, the effect was more muted. Some patients still must pay hundreds of dollars every year for their epinephrine.
There are two problems keeping the price of EpiPen and its peers high. First, it’s a combination of a drug (epinephrine) and the device that delivers the drug. This drug-device combination is governed by a complex web of regulations that prevented the significant price drops you would expect when new competitors are introduced. And second, across the US health system, more of the cost of medical care is being passed on to patients, via high-deductible health plans and other benefit design changes, which means that many people are still exposed to high costs even if the topline price for epinephrine has started to come down.
The renewed focus on EpiPens comes during a time when insulin, another high-profile drug, has received more attention from policymakers. Last year, Congress imposed a $35 monthly cap for Medicare beneficiaries and mandated steep discounts for Medicaid. In response, and with the looming threat of more ambitious action by states, all three of the major US insulin manufacturers have slashed prices for some of their products in the past month.
“We’ve just shown that we can do this for insulin,” said Kao-Ping Chua, a University of Michigan health policy researcher who has studied epinephrine’s costs. “We can improve the affordability of lifesaving drugs.”
Now he and others are hoping that, rather than rest after the recent successes with insulin, policymakers will turn their attention to epinephrine next.
Why are EpiPens so expensive, anyway?
Epinephrine is a naturally occurring hormone in people’s bodies, where it is more commonly referred to by another name: adrenaline. In that function, it is vital to the fight-or-flight response, increasing blood flow to the muscles and kicking a person’s heart into a higher gear.
But since 1901, when it was first isolated by Japanese chemist Jōkichi Takamine and soon after put to use medically, it has also become an important medication primarily (but not exclusively) for people experiencing anaphylaxis — an extreme, and sometimes fatal, allergic reaction that restricts the ability to breathe.
More than 1 million Americans have an epinephrine prescription. It’s not a medicine that they take regularly, like insulin. It is used in emergencies, where it can be the difference between death and survival.
The version of epinephrine most people are familiar with is the EpiPen, an autoinjector most people can use with minimal training that delivers a precise dose. The EpiPen came onto the market in 1983, and, by the mid-2000s, it was still the dominant epinephrine product, with a 90 percent market share and $200 million in annual revenue.
In 2007, Mylan Pharmaceuticals received the rights to produce and sell EpiPens from its previous manufacturer, Merck, which had obtained the rights to produce and sell the drug through a series of mergers and acquisitions since its introduction. Mylan quickly refreshed the product: While the medicine and basic mechanisms were the same, the company made tweaks to the device that allowed it to obtain new patents that would extend its monopoly and stave off production of any generic versions of the EpiPen. The company also entered exclusive contracts with larger entities, like school districts, to protect its market share.
Over the following decade, Mylan also jacked up the list price of a two-pack of EpiPens from $94 to $609 — and, as a result, patients who depended on this medicine in a life-or-death emergency increasingly found it more and more difficult to afford, even as the product itself remained largely unchanged.
According to a 2017 analysis published by Chua and Rena Conti, average out-of-pocket spending on EpiPens more than doubled from 2007 to 2014. The average was up to $75 per year, but that is just an average. Some people were paying less, depending on their health insurance, but other people were paying much more: The percentage of people with an EpiPen prescription who were paying $100 out of pocket annually increased from 4 percent in 2007 to 18 percent in 2014; the percentage of patients with out-of-pocket costs above $250 rose from almost nobody (0.1 percent) to 7.4 percent.
In outlier cases, such as families with multiple children who need an EpiPen prescription, a household could end up spending more than $1,000 annually just to make sure they had enough doses of the drug on hand, Chua told me. More recent research has shown that an out-of-pocket charge of as little as $10 can discourage patients from filling prescriptions.
Stories of the drug being unaffordable for patients began to gain traction in the news around 2016, and Mylan faced significant scrutiny from public officials, including a fraud investigation that ultimately led to a $465 million settlement over improper Medicaid billing in 2017.
The company sought to soften the backlash by introducing an unbranded version of the EpiPen in 2016, the first significant competition to the brand-name EpiPen in years, priced at $300 for a two-pack. Mylan’s patents have also started to expire, and more competitors came to the market in the following years, usually with list prices between $200 and $400.
Over time, the egregious cost of EpiPens faded from the headlines.
The 2 big reasons EpiPens can still be so expensive
But the cost crisis never really left.
The introduction of lower-priced competitors seemed to promise that the epinephrine affordability crisis would ease, and for some patients, prices have dropped modestly. But thousands of families are still struggling to afford this essential medication today.
Chua and Conti updated their research last year, reviewing out-of-pocket spending on EpiPens and their peers from 2014 to 2019. They did find that, in the aggregate, average annual spending dropped from about $115 annually to $75. But there was still a sizable portion of the patient population, about 8 percent of users, who were paying more than $200 per year for their medicine. Most of those patients, about 63 percent, were children, and those families paid an average of $657 annually for their epinephrine.
Digging deeper into the data, two things stuck out to Chua. One, most of the people with high out-of-pocket costs were using non-branded alternatives to the brand-name EpiPen, meaning this was not simply a problem of patients and doctors sticking with a more expensive but well-known legacy product. And two, most of these patients were enrolled in a high-deductible health insurance plan.
Both of those findings reveal why the epinephrine cost crisis persists for some patients, years after the initial outrage.
The first problem — high prices even for generic versions of the drug — is a bit of a surprise, given that competition is the primary mechanism by which the US health system reduces prescription drug prices. In more conventional markets, the introduction of generic competition usually leads to prices dropping by 75 percent of more. But that hasn’t happened with epinephrine.
“The prices of these competing products, it’s lower, but it’s not low,” Chua said. “It appears to be a 50 percent discount. It’s relatively less, but in an absolute sense, it’s still high.”
The problem is that EpiPens and their peers are not simply drugs, but drug-device combinations. The FDA regulates those products differently than other medications.
With a more conventional drug, it is fairly simple for a generic version of a drug to be approved as fully substitutable for the brand-name version. The generic company needs to show its product is similar to the original in its chemistry and, once that happens, doctors can prescribe the generic the same as they would the brand-name drug, or pharmacists are permitted to substitute the cheaper generic for the more expensive brand-name drug when the patient fills their prescription at the drug store.
But that is not the case with drug-device combinations, Conti said. The bar is higher.
“Basically, both the drug and the device have to be proven as equivalent, and it’s much harder to do this with a device,” she said. “Devices have patents, trade secrets, and simple sourcing features that make it very difficult to copy exactly. This, in turn, affects drug delivery in ways that may be difficult to predict.”
That makes it more difficult for a new competitor to gobble up Mylan’s market share by offering a cheap alternative. Instead, after Mylan itself began offering the $300 unbranded version of its EpiPen, competitors that have entered the market have usually set their prices in roughly the same range and tried to peel off customers with more targeted sales pitches, such as smaller injectors that are easier for kids to carry around with them. Prices are not at the forefront.
“This is not what we normally see when you have fully substitutable generics coming into the market,” Chua said. “There’s usually a much greater decrease in price and therefore out-of-pocket spending.”
The stubbornly high list prices of epinephrine flow into the second problem: Patients are shouldering more of the cost of their health care. Most of the patients paying more than $200 per year in Chua and Conti’s research were enrolled in high-deductible health plans.
According to the Kaiser Family Foundation, the percentage of Americans enrolled in employer-sponsored insurance (which covers more than half of the US population) with an annual deductible of $2,000 or more has increased from 7 percent in 2009 to 32 percent in 2022.
People who purchase insurance individually through the Affordable Care Act’s marketplaces can also have deductibles in excess of $2,000 if they do not qualify for certain federal assistance (though most of the customers on those marketplaces do get a discount on out-of-pocket costs).
“Fundamentally, I view this as a problem of insurance benefit design,” Chua said. “We as a society have decided it’s okay for insurance plans to utilize deductibles and coinsurance in this blunt way that treats epinephrine in the same way as an ineffective drug.”
That is the problem policymakers have homed in on with new proposals aimed at making epinephrine more affordable.
How policymakers are trying to make epinephrine more affordable
Fresh off the recent progress in making insulin more affordable, state lawmakers have turned their attention back to EpiPens.
The Colorado House, which had already passed an out-of-pocket cap for insulin in 2021 that became law, approved a similar measure late last month capping out-of-pocket costs for epinephrine at $60 per year. It is now under consideration in the state Senate.
A similar measure introduced in the Rhode Island legislature would require insurers to cover the drug at no cost to the patient. Other bills under consideration in Delaware, Missouri, and Vermont would require insurers to cover epinephrine, which is not currently mandatory, though most health plans do.
Chua said that an out-of-pocket cap would be an effective tool for making epinephrine more affordable. While health insurers may argue, with some justification, that this lets drugmakers like Mylan off the hook, the reality is that setting rules for insurance benefits would be simpler than overhauling how the FDA regulates prescription drugs and devices such as EpiPens.
And because most people only fill an EpiPen prescription once a year, even a $100 annual cap can make a big difference when people are currently paying hundreds of dollars for the drug every year.
But state action can only do so much, because self-insured employer plans — the large employer plans that cover most people with commercial insurance — are not subject to state regulations. They are instead regulated by the federal government. That means Congress would need to act to ensure epinephrine is affordable for all Americans, not just those in certain states with a certain type of insurance.
Congress did secure major wins on drug prices last year, including the introduction of a $35 monthly cap on insulin for Medicare beneficiaries. Chua said a permanent solution could be fairly simple, a variation of the Insulin for All Act that Sen. Bernie Sanders has introduced that would cap insulin costs for all patients, not just those on Medicare.
Patient advocates are trying to maintain momentum after the recent action on insulin, fearing that otherwise, the issue may once again recede to the background, as it did after the initial outrage against Mylan a few years ago.
“I would hope for federal action on this,” Chua said. “This piecemeal approach is not going to affect everybody in the country.”
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