The Marketing, the Lies, and the Unabridged Truth
There has been a flurry of news surrounding the apparent price hike in Mylan NV's EpiPen. Although on its surface, the reasoning can be quite simple to explain - the greedy corporate CEO who made the decision values profits over civility. However, there are two major contributors to Mylan's price hike, and nobody seems to be talking about the obvious elephant in the room.
The first contributor is Heather Bresch, the CEO of Mylan and the daughter of Senator Joe Manchin, a Democrat from West Virginia who recently had statements about the Constitution and the Bill of Rights, saying due process is "what's killing us right now" on the issue of gun control. You would expect Bresch to be a staunch supporter of the Democratically supported Affordable Care Act, but the first thing she did when the price hike became public was blame it, at least in part, for the rate hike. Bresch claims that due to more people being added to "High Deductible Plans", a product of the ACA. High deductible plans aren't totally uncommon. Before the ACA, high deductible plans were commonly bought by young, healthy Americans. The deductible is what you pay out of pocket before the bulk of the insurance starts to kick in. A co-pay would go towards your deductible, which is why most healthy people don't ever reach their deductible. From an insurance standpoint, the deductible lowers your risk of payout, especially for multiple, low cost visits to the doctor or prescriptions. An insurance plan that covers all or nearly all of your office visits completely usually costs a fortune, not because insurance companies are greedy, but because the risk of their payout is nearly 100% and the primary costs of office visits, prescriptions and operations are catastrophically high.
Aside from whether or not the ACA is completely to blame for the recent price hike, there is another, more direct contributor to Mylan's price hike of the EpiPen, the copyright. In my opinion, a lot of the outrageous prices in drug prices directly correlate to the copyrights that protect those drugs, not the overall need or demand for those products. When pricing any product, there are two methods you can use to come up with a price. The first is by competition. You have to consider what the other companies are selling similar products for, make a decision whether or not to compete at a higher price and sell a better product, or compete at a lower price and risk less profit. Typically, smaller companies can afford to take losses due to the fluid nature of a small business. Smaller business have fewer overall expenses, which means their profit margins can be adjusted fairly easily. Larger, public companies typically have to keep revenue as high as possible. Public companies are open to the general public for investment, and most public companies see keeping their stock price high as a responsibility to their shareholders. Maximum profits mean the maximum price you can sell your product at, while still being competitive. A lot of times, maximum profit means lowering the cost of production in order to stay competitive with the price. The second method is called "what the market will bear", which is a method used if you're the only supplier, or you have a monopoly on the idea or copyright. This method is commonly used with new products, which are generally introduced at a higher price. Using this method usually means the company that introduced the product wants to recoup the cost of research and early development as quickly as possible, while still being able to be purchased. Generally, this method is used with new-to-market products of ideas that have recently come out of research, after millions (sometimes billions) of dollars have been invested into its production. The company is right to price products this way in order to recoup the costs before competition comes to market.
Mylan doesn't have to worry about competition. The EpiPen Auto Injector is currently licensed under copyright law to hold the patents to the EpiPen, one in particular, until 2025. Mylan has been in legal battles recently trying to keep competition out of the market both by use of copyright law and lobbying. Mylan has been instrumental in its efforts and one could easily draw a line between Bresch and Senator Manchin who is a member of the Senate Committee on Science, Commerce and Transportation, a committee whose purpose is economic growth and funding for scientific research. In other words, the committee deals directly with drug companies like Mylan.
Historically speaking, copyright law and the right to private property have always been at odds with each other. The founders of this country needed to balance the fight. The original right to patents was 7 years, plus a 7 year extension could be made by appeal for a total of 14 years. The founders knew that a 14 year patent allowed the inventor to recoup the costs of his/her invention and allowed for profit before the idea would be returned to the public domain for public use. Since its inception, patent and copyright law has been used as a tool for monopoly. Copyright and patent have been slowly increased over the centuries, the largest of which coming in 1994 when copyrights and patents were extended to 70 years after the death of the creator. Copyrights that last for this long create monopolies. In a monopoly, you can raise the price as high as you want, without fear of competition, especially if you're Mylan, with an ace in the hole.
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Phil DeHaan - Founder and CEO of Vote Liberty, Inc.