Pricing Health: Skyrocketing Prices for "Drugs for Life"

Since the introduction of the Auvi-Q in early 2013, there has been a price war going on between Sanofi, the maker of the device, and Mylan, maker of the EpiPen. Both devices are epinephrine auto-injectors: single-use devices that contain a single dose of epinephrine and can easily be administered to oneself or to another person with minimal medical training. These devices are used to halt the serious, multisystem allergic reaction known as “anaphylaxis” which can occur when people with food allergies eat a food they are sensitive to. 

By early 2014, my research on food allergies was well under way and I was starting to understand some of the priorities and events that shape the food allergy world. The price battle between Sanofi and Mylan was just heating up at around the same time. Both companies released “$0-copay coupons” within weeks of each other. These coupons allow people with health insurance in the United States to get their medication effectively for free. You hand the coupon to the pharmacy cashier and the company reimburses the store for what the patient would typically pay up front as a copay for their medication. It makes these devices free from the point of view of the patient – though the insurance company and drug manufacturers ultimately end up splitting the cost.

I remember how these coupons were received by food allergy bloggers, many of whom I’ve had the good fortune to meet in the year since they were first released. It seemed that the Auvi-Q’s design was winning over many people with food allergies and parents of food allergic kids. First of all, the device was much more convenient for sticking in a pocket or purse – roughly the size and shape of an iPhone 4. Second, the voice seemed to please mothers of allergic kids in particular, since it could guide untrained caretakers of their children through the process of administering the medication in an emergency.

A Changing Economic Picture

But now the price of the Auvi-Q is going up. Insurance companies are choosing not to cover the device, presumably because it’s so similar to other devices that are already covered (like the EpiPen). Coupons are harder to come by and no longer reduce patient’s cost to $0. For people without insurance, the $569.99 sticker price is prohibitively expensive.

There’s an excellent analysis of this series of events from a legal and parental perspective over at the food allergy blog Oh Mah Deehness! Homa points out that the “contract” implicit in purchasing goods from a store only extends to a particular transaction. The implication of this is, as I understand it, that there is no implied guarantee that the future price of the goods will remain the same. This is, she argues, a problem when it comes to epinephrine auto-injectors because there’s an ongoing need for a person with food allergies to have the recommended 2 unexpired, unused devices on their person at all times. It seems as though auto-injector manufacturers have violated the trust that they were building with the food allergy community last year – but what they are doing when they adjust their prices is, in fact totally legal.

A Social Science Perspective

I’m turning to Joseph Dumit’s Drugs for Life argument to parse this as a social scientist. I’ve mentioned Dumit’s work before, but I don’t think I’m mentioned this particular book. In this book, Dumit’s research reveals that the costs to develop new drugs combined with the profit motivations of shareholder-owned pharmaceutical companies means that these companies focus their efforts on producing “drugs for life.” Dumit means two things with this phrase: first, drugs that must be taken for life; and second, drugs that help sustain and extend life. Epinephrine fulfills both those criteria for “drugs for life,” though in a little bit different way that Dumit originally intended.

The benefit of developing “drugs for life” for pharma companies is that patients need to continue purchasing them on a regular basis for the rest of their lives. Today this is true for epinephrine auto-injectors for people with food allergies, since there is no other widely accepted rescue medication and no way to prevent or “cure” food allergies.

The Auvi-Q episode emphasizes one part of this story that Dumit hints at but doesn’t exactly make the focus of his argument. As people – both patients and doctors who prescribe medications – get locked in to expecting and relying on a product or product category, pharmaceutical companies have more and more leverage to raise prices to whatever level they wish. Now that epinephrine is widely accepted by both doctors and patients as the one best and vitally necessary rescue medication for treating food allergies, pharma companies have essentially unlimited power to demand whatever prices they want.

What the pharmaceutical industry ends up with is a market in which it has a lot of power to set prices – but not infinite power. Pharma companies have to play a delicate game, trying to maximize profits without alienating consumers.

In the case of epinephrine auto-injectors, there are in fact several options on the market, with different patterns of insurance coverage. Patients can find out which products, if any, are covered and potentially switch to them. This is the kind of argument we hear about a lot in debates about the price of health care in the US today: the market will fix it.

But there’s another angle to consider, too, separate from abstract appeals to “the market.” Patients have power as well, not only to switch to competitors but also to articulate their concerns publicly. This is especially the case in our age of social media, when local illness support communities have banded together into a network with national and international reach. The food allergy community is a well-read, well-spoken group, and some writers have even been featured before on major news outlets. $0 copays anticipated patient anxiety about price in a crowded market; perhaps they, or something like them, will come back if concern about rising auto-injector prices is articulated widely and loudly enough. Those women I’ve begun to call “mother activists” in my academic writing – many of whom will likely read this – might be able to slow the rising tide of high auto-injector prices.

My final verdict on this issue? Stay tuned – I think there is more to come…

5 Comments

  1. Danya – I think that there is certainly the ongoing issue of going with one product or another and then having the tables turned on that loyalty. The alienation that comes is two fold here because there's a price increase on its own and the price increase that comes on the heels of what was a good PR move, offering $400 vouchers for Auvi-Qs that had early expiration dates. People will take those vouchers now and find that the replacement auto-injectors cost more than the covered product so I think the company will face customers that are doubly upset (first about the expiration issue and then about the coupon meant to fix it). Most technology is priciest at the early adoption phase, and then decreases over time, but with these products the early adopters were teased in with lower prices as you mentioned. Maybe the strategic decision is to just cut out cash pay patients and make up the lost money with the insurance-covered patients who will not mind the cost at the consumer end? It is all so nebulous and the finger pointing goes from big pharma all the way down to the neighborhood pharmacist. I agree, there is certainly more to come, thank you for boosting the signal!

  2. Agreed, there will be more to come! We are bring priced right out of the epinephrine auto-injector. My curiousity also asks if there are any federal regulations on increasing prices of medications? Personally, I would like to do more research regarding this. Also, I am seeing more and more people turning to the generic market and other alternatives (syringe). This is going to be a very interesting time period needless to day.

  3. Homa – I think you're right that a lot of technologies come down in price with time, but the trend in pharmaceuticals right now is the opposite.

    One issue is that medications given in hospitals are priced high to make up for other services and infrastructure that hospitals can't bill insurance for but need to be paid for somehow – for example, $100 for a dose of acetaminophen or ibuprofen.

    Another issue is that “specialty” drugs – drugs that target particular diseases with small communities – are largely immune from the price coming down. Cancer drugs that have been around for decades are increasing in price. New drugs like Solvadi (hepatitis C “cure”) are being introduced with already-high prices and then drug makers are threatening to raise them because they're so effective that they worry (they claim) about running out of patient populations too fast to recoup their investments.

    Finally, very ordinary prescription meds, like certain antibiotics, are going up in price because simply because they have been so cheap for so long. No one wants to make them, so there is a shortage of supply, and the few generic manufacturers left can charge more for them. This is especially ironic with antibiotics because the overuse in animals and humans is making them rapidly less effective.

    Again, I think this is why the “drugs for life” argument is so convincing to me: You get people hooked, so to speak – you get patients and prescribers to expect to have access to certain drugs – and then they can't NOT use them. In practice it's rather frightening.

  4. And Gratefulfoodie – There aren't regulations on this. The biggest regulator of drug prices in the US is whether they're covered by Medicare and Medicaid. The government doesn't just pick a price – there's lots of negotiation that goes on. And, unfortunately, a lot of the government employees doing the negotiation have worked at one point or another in the very companies they're regulating – which they're allowed to do because it's assumed if they've worked in industry, they're experts on it and will (counterintuitively, and largely falsely) be better at regulating industry.

    If drugs are not covered, pharma has lots of legal tools to force coverage – saying that the government is unfairly targeting a particular company, for example. Or, they can get patients and providers to push the government or other insurers to cover the drugs by backing advocacy work.

    And then once the federal government is more or less coerced into covering drugs on terms favorable to the pharma industry, commercial insurers slowly follow their lead.

    Once the contracts are signed, they're enforceable. But how the contracts get written is a shady process, and there's nothing that really regulates it.

  5. Awesome! As a mother, I have a child who suffer from food allergies, I learned from my friend some good solution for my daughter, to bring her lunch to school. There is no reason for her to have to take the chance of eating something they may be allergic to in the lunch room at school. Pack their lunch so you know what they are eating. I don't think if this effective to others but for me, is just good enough.

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