Mylan will create a generic EpiPen, competing against itself

Gymnasts at the just-concluded 2016 Olympics perform stunts with names like “double-twist backflip” or a “forward handspring with a half-spin;” but these moves seem to pale in comparison to what Mylan has done in the past week. After offering to triple the value of its copay coupon, to $300, which offsets about half of the retail purchase price of its EpiPen anaphylaxis treatment, this week it now offers to sell an authorized generic of its own branded product, also for $300. “Authorized generics” are a recognized regulatory category by FDA; the AG product, as long as it is basically the same as the branded product, needn’t go through ANDA approval steps. Usually a brand owner will allow for an AG by another company, to compete with other generics entering a brand’s market; on the surface, it appears that Mylan is damaging the market for its own brand while cutting the revenue it receives by half.

Enter the wacky world of pharma pricing and distribution, however, where the numbers don’t add up in this manner. Going forward, Mylan could be more aggressive in not discounting the AG product the way the branded product is, which could mean no net loss to Mylan. It is also signaling that it will attempt to direct-distribute the AG, that is, sell it directly to pharmacies, hospitals and doctor’s offices, thus skipping the rebates and discounts that occur in conventional distribution. The $300 retail price could even result in higher net revenue under these circumstances—but that remains to be seen. All this is occurring for a drug, currently generating over $1 billion annually for Mylan, that is itself a generic product (with a proprietary injection mechanism), and for acute care—attributes that seldom result in blockbuster sales status.

During the simmering EpiPen pricing dispute, Heather Bresch, Mylan’s CEO, has been blaming unnamed middlemen (i.e., pharmacy benefit managers) for the painful pricing of EpiPen, which has risen over 400% from when Mylan acquired the drug in 2007. “Because of the complexity and opaqueness of today's branded pharmaceutical supply chain and the increased shifting of costs to patients as a result of high deductible health plans, we determined that bypassing the brand system in this case and offering an additional alternative was the best option.” Buying into that proposition implies that the dramatic ramping up of the drug's price occurred because Mylan had to negotiate discounts with these middlemen---a tenuous argument at best. Although this dispute didn’t start out for this end result, if Mylan can successfully distribute its drug directly—and get it in the hands of patients and school nurses economically—the “brand system” Bresch refers to could be challenged. Another possibly unintended yet desirable result is to make the eventual market for other generics, in the works at Sanofi and Teva, less attractive.

The AG repositioning doesn’t sit well with, among others, Robert Weissman, president of Public Citizen, a nonprofit advocacy group that often criticizes pharma industry practices.  “The weirdness of a generic drug company offering a generic version of its own branded but off-patent product is a signal that something is wrong," he commented in a public statement. He goes on to say that Epipen is sold for roughly $200 in Canada, and $100 in France, while in the US, Mylan "aims to continue ripping off some segment of the marketplace" that will preferentially choose the branded product.”

Yet another lesson—a painful one for the pharma industry—is seeing how a consumer backlash started out in social media among parents of children with allergic conditions, reached the megaphone of members of Congress and proceeded to become an issue in the presidential electioneering. Is there a next target drug to get this workover?