Sanofi missed out on EpiPen and it's not happy
Nearly two years after Sanofi pulled out of its partnership with Kaleo Inc. for the epinephrine autoinjector Auvi-Q, the French pharma has filed suit against EpiPen manufacturer Mylan in an effort to recoup its losses.
In a New Jersey federal court filing on Monday, Sanofi accused the beleaguered drugmaker of engaging in “illegal conduct to squelch …competition” and “preserve the monopoly position of their $1 billion crown jewel branded drug.”
In the complaint, Sanofi lays out a scenario where Auvi-Q was the first credible threat to the EpiPen monopoly (a matter of perspective), Auvi-Q was a buzzed about product (debatable), and “Mylan erected artificial barriers to U.S. consumers’ access to and use of Auvi-Q” through “new and unprecedented rebates to commercial insurance companies, pharmaceutical benefit managers, and state-based Medicaid agencies” (true).
For its part, Sanofi is hoping to recoup the lost sales it thought it should have gained had Auvi-Q been a success, as well as the legal costs of pursuing the suit.
The ironic part of this story is that Sanofi did not create this product, nor was it heavily invested in it. It signed the original deal with Kaleo in 2009, paying $25 million upfront and agreeing to $205 million in milestone payments for the U.S. and Canadian rights.
The deal for Auvi-Q was one of Sanofi’s last-ditch efforts to maintain a presence in diabetes as its flagship insulin Lantus has faced increased competition and lost market share to just about every other drug in the space. Sanofi made several of these poor deal choices (remember that deal it inked with Mannkind for its doomed inhalable insulin?).
Mylan’s bad behavior
The lawsuit that Sanofi is bringing against Mylan isn’t without merit. Mylan CEO Heather Bresch said during an earnings call in 2015 that the EpiPen drugmaker was going on the defensive and preparing to defend the brand through extensive consumer education campaigns.
The company created its EpiPen4Schools campaign that has provided more than 65,000 free EpiPens to more than 700,000 schools in the first four years of its existence. The company also has been running unbranded awareness campaigns that help educate consumers about the need to keep the emergency device with you in the event of an unexpected allergic reaction.
Mylan has been criticized for the extensive lobbying it did to get federal legislation passed that ultimately requires schools to keep epinephrine autoinjectors on hand. While the laws don’t specifically call for that to be the EpiPen, its dominance in the market makes it the likeliest one to benefit from the legislation.
Bresch also admitted during a second quarter earnings call in 2016 that Mylan had negotiated with payers to provide steep discounts on EpiPens in order to undercut potential competition.
While most of these activities are widely used by companies for lifecycle management and common practice throughout the industry, not all of Mylan’s activities may have been above board. In mid-2016, members of Congress launched an investigation into the skyrocketing prices of the drug and the company marketing practices surrounding it, including potential anti-competitive behavior and defrauding the Medicaid program (Mylan settled this claim for $465 million).
Sanofi’s weak claims
While Mylan is obviously not without blame, Sanofi’s claims that Auvi-Q was a major competitive threat could easily be seen as overblown.
The French pharma claims in the suit that Auvi-Q had a market share of 13% in 2013 that was halved by 2014 due to Mylan’s pricing efforts. The suit goes on to note that “for patients in the United States covered by third-party payors who had Auvi-Q on formulary at similar co-pay terms to the EpiPen, Auvi-Q reached over 20% market share by the end of 2013 and reached over 30% market share in 2015.”
The problem is, even if Sanofi’s assertions of a potential 30% market share could be accurately translated to the wider population, 30% is still a small amount when there are only two to three competitors in the market.
This neglects the bigger issue – Sanofi dropped the partnership in early 2016 after Auvi-Q was voluntarily withdrawn from the market due to safety issues. Epinephrine autoinjectors are largely used by children and their marketing – moreso than many other pharmaceuticals – is based deeply in the trust of parents.
Kaleo has since been able to bring an improved Auvi-Q back to market. Yet, in spite of highly publicized backlash and recent recalls, Mylan still dominates this space. According to Bloomberg, Mylan now controls 70% of the market, while Impax Lab’s Adrenaclick has an 18% share and Auvi-Q comes in at just 12%.
While it will be up to the courts to decide if Sanofi really deserves to be recompensated, it could just be that Mylan had the greater marketing engine and built a brand that consumers chose to trust.
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