PHARMACEUTICALS AS A PUBLIC UTILITY UNIT II: WHO PAYS FOR RESEARCH AND DEVELOPMENT
Most of us have heard of the EpiPen – the pharmaceutical corporation Mylan’s trade name for its Epinephrine Autoinjector. It is a device used to quickly inject the life-saving drug epinephrine into a person undergoing a potentially fatal allergic reaction, called anaphylaxis, to a variety of things such as bee stings, peanuts or other foods, and medications. It is estimated that over 15 million Americans are subject to food allergies. Some 200,00 actual cases of anaphylaxis resulting in about 200 deaths occur each year.
Epinephrine is the industry name for adrenaline, the hormone produced naturally by the human body to allow people to react quickly to extreme conditions. A Japanese-American biochemist named Jokichi Takamine is generally credited with the discovery of adrenaline around the turn of the 20th century, so the drug is over a century old. It costs less than $1 to produce the epinephrine contained in an EpiPen.
The mechanical device itself – the “EpiPen” – also has a long history. Quoting Matt Reimann in Timeline, “In 1973, as fears of chemical warfare mounted, the Pentagon asked scientists at Survival Technology, Inc. to develop a first-line of defense for soldiers exposed to nerve gas.” The result was the hypodermic autoinjector. “One of the leading engineers on the autoinjector project was Sheldon Kaplan, who is remembered in his 2009 obituary for having “invented the EpiPen.” His name appears alongside four other inventors on the 1977 patent for the hypodermic autoinjector.”
So, the EpiPen was developed using public funds through the Pentagon over 50 years ago. In 2016 “a Silicon Valley engineering consultancy performed a teardown analysis of the EpiPen and estimated that when adding that $1 of epinephrine to the additional manufacturing and packaging costs, total production costs for an EpiPen would come to $8-10 for a two-pack.”
The “ownership” of epinephrine and the EpiPen has a long and convoluted history. But in 2007, through a series of business and legal processes, Mylan Corporation acquired full patent and near monopoly rights to the EpiPen even though the company had absolutely nothing to do with, and spent nothing on, the development of either the drug or the mechanical device.
When Mylan acquired the EpiPen in 2007 the price for the drug was $57.64 and the salary of Mylan’s CEO, Heather Bresch, was $2,453,456. By 2015, Bresch had raised the price to $317.82. and her salary had gone to $18,931,068. In 2016 the price of the EpiPen rose to over $600.
It’s probably also worth mentioning that in 2014 Pennsylvania based Mylan moved its corporate headquarters to the Netherlands to avoid U.S. taxes and there’s also this from the U.S. Securities and Exchange Commission in 2019:
“The Securities and Exchange Commission today announced charges against Pennsylvania-based pharmaceutical company Mylan N.V. for accounting and disclosure failures relating to a Department of Justice (DOJ) probe into whether Mylan overcharged Medicaid by hundreds of millions of dollars for EpiPen, its largest revenue and profit generating product. Mylan agreed to pay $30 million to settle the SEC’s charges.”
The methods through which Mylan and Heather Bresch used brilliant marketing and well-funded lobbying to make billions off the EpiPen are endless and sordid. But perhaps their most cynical action was how the company lobbied congress and President Obama to pass legislation encouraging all schools to stock the drug to “protect” the children. The market, of course, was huge and publicly funded. And apparently it bothered neither Bresch nor Mylan that thousands of families across America who could no longer afford the drug, and whose insurance didn’t begin to cover the costs, could no longer protect their children at home. It is unknown how many deaths have occurred to support outlandish CEO salaries and corporate greed.
The story of epinephrine and the mechanical EpiPen is relevant because, far from being a special case, Mylan’s actions are the rule in the pharmaceutical industry. Let us repeat, the mechanical autoinjector that became the EpiPen was developed using public funds and Mylan invested nothing in the development of the drug or the device. The claim by Mylan and pharmaceuticals in general that huge investments in research and development (R&D) drive up the cost of drugs is grossly overstated.
Quoting Alexander Zaitchik in a “The Other 98:”
“Something odd happened when the Trump administration submitted the original version of its latest pro-corporate budget: Big Pharma didn’t like it.
The problem wasn’t a tax hike or new regulations: the problem was that the budget included deep cuts to the budget of the National Institutes of Health.
If those cuts had gone through, they would have exposed one of the biggest lies told about Big Pharma: that the current system of patents and price-gouging is just an unfortunate necessity to cover the cost of all their brave and noble R&D work.
Trump’s original spending proposal for fiscal year 2019, released last month, included major cuts to not just to the NIH, but the National Science Foundation as well. It is those two publicly funded entities — not Big Pharma — that support the bulk of the country’s basic research into diseases and pathways to new treatments.
That’s why the cuts were especially unwelcome in the executive suites of drug and biotech companies. Their business models depend on Washington subsidizing expensive, high-risk basic research, mostly through the vast laboratory network funded by the NIH.”
Adding to this from The National Academy of Sciences of the United States of America:
“This report shows that NIH funding contributed to published research associated with every one of the 210 new drugs approved by the Food and Drug Administration from 2010–2016.”
Additionally quoting Dana Brown in the 2019 comprehensive study (well worth taking the time to read), Medicine For All: The Case for a Public Option in the Pharmaceutical Industry:
“Much of the profit extracted by pharma companies represents a form of double-taxation, as public funding underpins pharmaceutical R&D, but the public pays again through out-of-pocket prescription costs, contributions to Medicare and Medicaid and rising insurance premiums. We also lose massive amounts of public revenue (which could be used for healthcare and public services) through the tax evasion rampant in the sector. The highly financialized nature of the industry also makes it a contributor to growing economic inequality. The highest drug prices in the world, coupled with differential pricing further impact our most at-risk patients and communities. Concentration in the market produces anti-competitive behavior which contributes to rising costs and lack of availability of new medications.”
Unit III will discuss: The Private Pharmaceutical Industry – Hazardous To Your Health