How Mylan ended up with an EpiPen monopoly
Since Mylan's acquisition of the EpiPen in 2007, the generic giant has rapidly come to depend on the specialty product to bring in a large portion of its revenues (more than $1 billion annually), pushing the company to fiercely defend the franchise and work tirelessly to promote it. But a lack of competition and what Mylan calls "brand equity" has made the EpiPen a household name.
For years, Mylan told investors that it was unconcerned about competition due to the complicated nature of the product and trustworthiness of the brand.
"The strength of the EpiPen Auto-Injector brand name, quality and ease of use of the product and the promotional strength of the Mylan Specialty U.S. sales force have enabled us to maintain our leadership position within this therapeutic category," said the company in its most recent annual filing with the Securities and Exchange Commission.
Yet, EpiPen has faced competition.
Sanofi brought a competing product to market in 2012, another epinephrine auto-injector called Auvi-Q. Mylan was worried, prepping investors for revenue declines and a loss in market share.
The company even worked tirelessly with payers to offer discounts and create an environment that would help maintain EpiPen's competitive advantage over Auvi-Q.
"While we continue to believe that the regulatory barrier-to-entry for an AB-rated generic EpiPen remains high, we also are factoring the impact of an AB-rated competition into our guidance in the second half of the year," said Mylan CEO Heather Bresch during a fourth quarter earnings call in 2014, referring to Auvi-Q. At the time, the company guided that revenues in their specialty unit would remain flat due to competition for EpiPen.
And then the miraculous happened – at least, for Mylan.
Auvi-Q was recalled from the market in 2015 when dosage problems caused by the device raised safety concerns. Problems with products that are used as life-saving devices for children are not the sort of development a company can come back from, and Sanofi eventually admitted defeat. The French pharma abandoned the product.
EpiPen was back to being the market leader with control of more than 85% of the market, allowing Mylan to start renegotiating contracts with payers since no alternative was available and giving the generics firm the ability to raise the price.
Mylan CEO Heather Bresch even noted on the company's second-quarter earnings call that "payer pricing dynamics" continue to evolve as the company gets further out from the Auvi-Q recall.
While Sanofi and Auvi-Q are out of the picture, there is potential for a generic version of the product to come to market later this year form Teva Pharmaceuticals.
Mylan hasn't been too worried. The Auvi-Q recall further strengthened the dependability and safety image that Mylan has built around the brand. Building that trust with consumers has included EpiPen4Schools program that has provided 65,000 schools with more than 700,000 free EpiPens since 2012. The company has even partnered with one of the most beloved brands on earth – Walt Disney Parks and Resorts.
Yet, the thing that might finally take down the EpiPen empire might not be competition or a problem with the product, but the company's own pursuit of sales. The company doesn't break out sales of EpiPen specifically, but has noted that it brought in revenues of more than $1 billion per year in both 2014 and 2015.
As of this week, Mylan has come under fire from Congress and the media for the enormous price hikes to the product, with data showing that Mylan has raised the price of the drug more than 400% since 2012.
The public outcry has included senators, state programs and consumers all pointing out that the product has become too expensive for many patients and schools.
The generics giant is hoping to combat these negative public sentiments, but that trust that helped build its monopoly could be its demise now that it's been broken.
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