Questions about Business Ethics in Pricing the EpiPen
Last Wednesday it was reported that the price of EpiPen, a life-saving injection device, had increased by 671 percent between 2007 and 2010. The public outcry led Mylan, the company that produces the EpiPen, to announce it would develop a generic brand and make it available within the next two weeks. This is a welcome development but it begs the question of what are the corporate social responsibilities of a company that produces a life-saving drug.
The EipPen increase follows the increase in another drug manufactured by Turing Pharmaceuticals, Daprim, by 5,000 percent. These increases seem unbelievable but they are true. Big-Pharma defends its actions by singing the same old tune that high prices are needed to fund ongoing research and development. However, there has to be a bright line where huge drug price increases become price gouging. There has to be some consideration given to what are the public responsibilities of Big-Pharma given many of their drugs improve the quality of life and save lives. We’re not talking about the price of a basketball ticket.
The common denominator in both of these cases is the public need for a drug that isn’t in a generic form as yet notwithstanding the announcement by Mylan. No doubt this has stoked the capitalist desires of Mylan and Turing, respectively, to earn whatever they can make while their drugs are still protected. But, is there a point where capitalism goes too far and harms the public good? Does Big-Pharma have an ethical responsibility to set reasonable prices for life-saving drugs?
Milton Friedman is quoted as saying: “There is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” It would seem this quote backs the actions of Big-Pharma given our free-market economic philosophy and Friedman’s belief that the only responsibility of business is to earn profits.
However, I don’t think Friedman would have anticipated such outrageous increases in the price of life-saving drugs and while he recognized that greed was everywhere, it doesn’t mean there should be no restraints on the actions of Big-Pharma – at least this is what I believe. The question is how it might be done.
Let me drill down on the facts of these cases for some perspective and to highlight the ethical issues. You may recall the story of Martin Shkreli, the former CEO of Turing, who spearheaded the unbelievable increase in the price of Daprim from $13.50 per tablet to $750 per tablet, or an increase of 5,000. Daprim is a life-saving drug that is used primarily to treat toxoplasmosis, an infection that affects people with compromised immune systems, particularly those with HIV/AIDS and some forms of cancer. Shkreli’s actions earned him the moniker of “the most hated man in America.”
Last Wednesday it was reported that the executive compensation of Mylan CEO, Heather Bresch, had an increased from $2.45 million (2007) to $19 million (2015), or 671 percent, more or less matching the price increase of the EpiPen. EpiPen is a device used to provide emergency epinephrine to stop a potentially fatal allergic reaction. It is a life saving device that can be used by parents if their kids have a food allergy, such as with peanuts. It is also used after an allergic reaction to something like a bee sting.
The price of EpiPen’s soared after the FDA changed its recommendation in 2010 that two EpiPens could be sold in a package instead of one and that they be prescribed for at-risk patients, not just those with confirmed allergies. And in 2013 the government passed a law to give block grants to states that required they be stocked in public schools.
So, what can be done about the extraordinarily high prices of medications? Bernie Sanders wants to make it legal for all Americans to buy drugs from Canada where they are significantly cheaper. This sounds like a good idea to me as it relies on free market competition to reign in out of control drug prices.
Price controls do exist in Europe and Australia because those countries believe – unlike phones or cars – the unique aspect of drug prices is if consumers can’t afford the product, they could have worse odds of living or face certain death. The European argument identifies the humane element and seems to me to be an ethical position.
But is it fair to drug companies to control prices of a product they developed and don’t they have a right to set whatever price the market will bear? I suggest we experiment with opening competition to Canada and other countries and see if it brings down the prices of drugs. As long as the drugs have been FDA approved, I don’t see the harm in following a free-market approach. After all, we have free markets in just about every other commodity. Is there a good enough reason to deviate from this model for drugs? I think not.
Blog posted by Steven Mintz, aka Ethics Sage, on August 31, 2016. Dr. Mintz is Professor Emeritus from Cal Poly San Luis Obispo. He also blogs at www.ethicssage.com.