The FDA and the EpiPen Shock

I haven’t written much about the massive increase in the price of the EpiPen because I’ve said it all before–mostly this about FDA costs and delay and some bending of various laws to favor cronies and, as with the infamous Shkreli and Daraprim case, one solution would be a reciprocity system that allowed importation of epipen-like devices approved abroad.

I’m glad, however, that I didn’t go into this in detail because SlateStarCodex has knocked one out of the park on this issue:

…when was the last time that America’s chair industry hiked the price of chairs 400% and suddenly nobody in the country could afford to sit down? When was the last time that the mug industry decided to charge $300 per cup, and everyone had to drink coffee straight from the pot or face bankruptcy? When was the last time greedy shoe executives forced most Americans to go barefoot?

…[lots of stuff about FDA and EpiPen specifically]…

Imagine that the government creates the Furniture and Desk Association, an agency which declares that only IKEA is allowed to sell chairs. IKEA responds by charging $300 per chair. Other companies try to sell stools or sofas, but get bogged down for years in litigation over whether these technically count as “chairs”. When a few of them win their court cases, the FDA shoots them down anyway for vague reasons it refuses to share, or because they haven’t done studies showing that their chairs will not break, or because the studies that showed their chairs will not break didn’t include a high enough number of morbidly obese people so we can’t be sure they won’t break. Finally, Target spends tens of millions of dollars on lawyers and gets the okay to compete with IKEA, but people can only get Target chairs if they have a note signed by a professional interior designer saying that their room needs a “comfort-producing seating implement” and which absolutely definitely does not mention “chairs” anywhere, because otherwise a child who was used to sitting on IKEA chairs might sit down on a Target chair the wrong way, get confused, fall off, and break her head.

(You’re going to say this is an unfair comparison because drugs are potentially dangerous and chairs aren’t – but 50 people die each year from falling off chairs in Britain alone and as far as I know nobody has ever died from an EpiPen malfunction.)

Imagine that this whole system is going on at the same time that IKEA donates millions of dollars lobbying senators about chair-related issues, and that these same senators vote down a bill preventing IKEA from paying off other companies to stay out of the chair industry. Also, suppose that a bunch of people are dying each year of exhaustion from having to stand up all the time because chairs are too expensive unless you have really good furniture insurance, which is totally a thing and which everybody is legally required to have.

And now imagine that a news site responds with an article saying the government doesn’t regulate chairs enough.

Read the whole thing.

Addendum: Steve in the comments reminds me that there is a case of a big increase in the price of chairs. Of course, it proves the rule.


Is America really becoming "freer" every year or is our regulatory structure going to choke us to death? I'm pretty sure our government is currently more honest than, say, the late 19th-early 20th century, but now with the media working hand in hand with the government for more regulation, more social engineering and more safe spaces....I don't know whether I'm optimistic about the future. And it's worse everywhere else.

" I’m pretty sure our government is currently more honest than, say, the late 19th-early 20th century,"

Yep, our pay to play is way more clear and transparent than the old fashioned methods.

Do you honestly think its not?

I suppose one could make a model whereby modern means of communication and transportation make coordination/collusion between powerful, monied individuals easier, thus increasing corruption and the like. But it seems to me that the ease with which information is now disseminated cuts much more in the opposite direction. Alternatively, perhaps the tolerance of regulatory capture has increased across the population, reducing the costs of exposure?

"Do you honestly think its not?"

I mean what I said. Our current standard is much more clear and transparent than the old models. But clearly it's still pay to play. Hillary Clinton's speaking fees and the Clinton Foundation's obvious sources of income are both transparent and pay offs to politically connected individuals.

Ahh. I read your tone as sarcastic.

I generally agree that we're in a much more transparent time.

And for the record, pay-to-play where 90% of the "pay" goes to charitable programs is a significant upgrade over the kind where it goes towards reelection.

Also when there is seemingly no play in the pay to play, another big improvement.

Uh, guys, fully half the people who met with her as Secretary of State paid money to the Clinton Foundation to do so. She sold the services of the office of Secretary of State. That's the play.

"Also when there is seemingly no play in the pay to play, another big improvement."

This reminds me of this quote:

"I did not send classified material, and I did not receive any material that was marked or designated classified." Hillary Clinton

mavery, I think you made a type. The quotations should go around "charity" rather than "pay."

Pay is indeed happening. Its the charity that is faked.

Right. Because if the Clinton Foundation wasn't doing tons a charity, Hannity would ignore it and focus on imagined health issues.

The email thing has some merit. The foundation thing is bad optics but has vanishingly little substance. People have to resort to comparing a charitable organization to a campaign to make it sound sinister.

Mavery, your argument is that because she spends her bribes on something that arguably has a charitable purpose in addition to its political purpose, this whole thing is somehow less awful?

Uh, guys, fully half the people who met with her as Secretary of State paid money to the Clinton Foundation to do so. She sold the services of the office of Secretary of State. That’s the play.

This is not actually true, and even AP has admitted that the tweet that started the fuss was sloppily worded, but never mind.

byomtv, did you actually read that article? It doesn't even question the facts of the AP report, it just tries to paint a "maybe there could have been nothing wrong here" picture. I admit I glossed over the fact that it was half the private meetings, so Putin didn't need to donate to get a meet and favors. But the AP didn't.

And yes, in fairness to Clinton, we don't actually know what favors were done in exchange for the bribes other than the meetings themselves.

Look, I get that Trump is awful, but would it kill you to admit that in any other year Hillary Clinton is a person who should be up on charges and not running for office?

It would not kill me to admit that Clinton sometimes operates around the edges, and maybe beyond, and I wish she and Bill were more scrupulous.

Whether she should be up on charges is a different matter.

Would it kill you to admit that, since we don't actually know what donors got, if anything beyond meetings, that "bribery" is an unjustified term? Look, I'm not crazy about how our system operates. But donations to politicians in exchange for things like meetings, referrals, and so on, are commonplace. The Supreme Court, no less, has told us that these are not bribery.

I do think it would be difficult to convict without evidence of what the bribes bought.

One of the most under-appreciated shifts to Western civilization over the past century is a drastic decrease in risk tolerance. Culturally and institutionally we have way more fear of even perceived threats to health and safety. Some of this has been channeled into really pointlessly dumb outlets. Moratoriums on nuclear power, groping by the TSA, parents charged with child abuse when their kids bike around the neighborhood. But for the most part it actually has made us much safer. Smoking is nearly extinct, auto fatalities are approaching zero, air pollution is way down, child mortality rates are astoundingly low.

The long-term problem is that a society of zero risk-tolerance becomes too easy to rent-seek from. Initially the cultural shift pays off handsome dividends as we get rid of the low-hanging fruit of needlessly reckless behavior. But over time the sustained anxiety needed to be vigilant against unappreciated dangers, will keep finding increasingly pathetic threats. If no risk is acceptable, then enterprising con-artists can leverage an analog of Pascal's wager. Simply claim that X is too dangerous (while conveniently selling alternative Y).

Who cares if there's any evidence to back up the claim? If it sounds at least somewhat plausible, the precautionary principle will demand regulating X, until the evidence proves otherwise. Dangerous until proven safe. After-all, no amount of risk is acceptable, so any unverified claim still comes with a non-zero p-value. Regulation springs eternal. Those savvy enough to work the process get rich from strangling society in an increasing web of cultural society and burdensome regulation.

Incredibly well written

As alluded to, there are less expensive epinephrine auto-injector products on the market. The challenge is they can't be substituted for an EpiPen if that is what a physician specifically prescribed. To the best of my knowledge only Idaho has addressed this by granting prescriptive authority to pharmacists for any epinephrine auto-injector.

I wonder if there is any restriction on people buying in Idaho that live in other states?

There's no restriction on buying it in Idaho regardless of where the patient is from. If a patient wants it shipped from an Idaho pharmacy to a residence in a different state, the home state likely has prohibitions unless said pharmacy is registered as a mail order facility in the patient's home state

This seems like a really sophisticated way of saying "boys will be boys!" ¯\_(ツ)_/¯

I think it is probably understood by the relatively informed that government behavior (FDA, patents, corruption, you name it) created the seeds of this situation. And yes, we should not be surprised that a company that has that situation abuses their monopoly power. We should probably be surprised it doesn't happen more often (although it does but is often hidden given the network of insurance coverage and payments). And yet, this explanation feels very much like it is letting Mylan off the hook.

I think there is a difference between this and the chair example--choice. Choice, both in whether to buy it at all and whether to buy the specific chair. For the chair example, we can just let market forces punish the greedy, but in this case we cannot. We can lament that the situation was created by government inefficiency and corruption, but we cannot just shrug and accept it as a consequential outcome.

I agree that this 'Chair' analogy is rather weak.

The regulatory 'problem', no matter the specific product/service/business, is always that government bureaucrats forcibly impose their subjective judgements on society... with significant unintended consequences.

FDA government employees have no special skills or wisdom unavailable in the private sector. Nor are FDA employees immune from self-interest, laziness, arrogance, or corruption. All the human foibles people worry about in private businessmen... exist as well in government employees. The sacred government Regulatory-Model has major flaws everywhere and always.
Who Watches the Watchers ?

" Nor are FDA employees immune from self-interest, laziness, arrogance, or corruption. " Very true, people are people.

I've wonder though if government employees, appointees and elected officials should not be subjected to a fiduciary obligation towards people in general and that failure to act accordingly be grounds for both civil and criminal legal action. Pretty much like we're hearing financial and investment advisers should be held and required to hold such a standard.

Great suggestion but somehow I doubt legislators will be hurrying to put themselves under criminal liability. And of course even if successful then all it will do is make them even more super cautious. Really the simplest approach is the best - reduce or remove FDA approval authority.

"somehow I doubt legislators will be hurrying to put themselves under criminal liability"

This is one of those situations where having a ballot initiative system is useful.

Time to reconsider the doctrine of sovereign immunity.

"...abuses their monopoly power."

That does seem to be what the uproar is about...a moral judgment that the company did not act ethically. But, isn't an alternative point of view that Mylan was upholding it responsibility to legally make a return for its shareholders? EpiPen sales revenue increased from about $200 million in 2009 when it began its marketing campaign and price increases to about $1.5 billion in 2016. Mylan's stock price increased about 125%...two competitors' stock prices increased 25% and 0.

Should the CEO have not made those marketing and pricing decisions? Based on...what? The company did not violate any laws, it merely took advantage of an opportunity. Her risk of losing her job was likely greater at the time from not making those moves than it is now. Will there be any negative consequences to the shareholders...will they company be forced to disgorge its profits? Not likely, the company has not been accused of illegal "abuses of monopoly power".

What did the company do wrong?

"But, isn’t an alternative point of view that Mylan was upholding it responsibility to legally make a return for its shareholders?"

Sure, that's an alternative point of view, but one that breaks many, many social contracts and views capitalism as the end, not the means. Corporations were originally created and recognized by the state not for wealth generation of a few, but as a useful construct that was for the good and wealth of the nation (e.g., community).

You can make the same argument regarding pollution, water, whatever. If we are going to operate under a philosophy of "as long as I get mine" the rest of the market, public, environment, community be damned, then fine--but expect it only to work out for a very, very small subset of elites.

We live in a world full of people that are interconnected in many ways--if we want to operate as though those connections are irrelevant, I suppose that view would be acceptable.

That seems like a self-serving rhetoric...i.e., "the company is immoral and violating "many social contracts by making me pay more." The same has been argued about cable TV rates. What harm was done by increasing prices?

And what "social contracts"? A theoretical contract conveniently assumed by the company's critics or the legal and explicit contracts between the company's management and those who provided it with capital?

Ignoring the issue of any social contract or morality, the fact remains we don't really want the rules government market interactions to be those that support the type of outcome that is achieve here. We want our economic institutions and processes to pretty much hold up against the positive view of free markets -- competition pushed prices down and quality up -- as socially good structures.

I'd suggest accomplishing that good outcome requires both good rules and a good culture -- in other words, it's a positive thing if a corporation is too greedy and opportunistic that the rest of us (both consumers and competitors or producers from other industries or investors) both shame the leadership of that bad actor as well as take other actions to address the market failure situation.

>>And what “social contracts”?

John above had a good response, but the fact that you ask this question makes it clear why you are struggling with this.

Our society, whether you like it or not, is based on social contracts--that you help those who are injured in times of crisis, that you don't take more of a resource than you need to continue your existence, that you don't take advantage of those far more vulnerable than you, etc. These social contracts are founded in human rights.

If you are a sociopath or your personal philosophy includes caring not one whit how your actions impact others around you, the environment, or the marketplace, then your philosophy would see that this behavior is in fact, ethical and you would not understand the purpose of or existence of social contracts. But as I said in another response, I find it odd that you don't seem to comprehend the logical consequence of this behavior--that while it may benefit Mylan or you in the short term, it will eventually have negative consequences either as a direct result of a particular action or because the shoe will be on the other foot and some other party will enact selfish behavior that damages Mylan or you.

You seem to want to equate the limits of the law with the limits of expected ethics. Go ahead, let the end justify the means, just don't a) be surprised why people seem to look at you as a terrible human being, or b) complain when the reciprocal behavior harms you or does not work in your favor. Maybe you want to live in a Machiavellian world were the only thing that matters is might and power, but the rest of us don't... and thankfully don't have to.


This is absolutely false and pernicious. The "social contracts" you propose are wholly imaginary and not based on human rights in any way whatsoever. This is what happens when someone tries to create a philosophical system in their own head without any reference to the numerous brilliant philosophers who have lived on this Earth.

The whole point of Machiavellian philosophy is that the ends justify the means, not that only power and wealth matter. This was a revolutionary concept for its time and one that reverberates to the present day with the dominance of utilitarianism over deontology.

There is a huge difference between ethics and a contract. Conflate them at your own peril. Contracts require mutual acceptance. Mutuality is the essence of contract.

Philosophers refer to social contracts rather more so than the other way around. It's not hard to find who the most famous examples are through a quick online search.

It's like saying that I must cite a physicist to discuss a physics theory.

"The same has been argued about cable TV rates."

I'd like to see "price gouging" charges brought against those who sell $9 beers at professional sporting events.

@MikeW: "What did the company do wrong?"

Price-Gouging is the vague ethical charge against Mylan.

But you are correct that Mylan is properly working & legally working the U.S. commercial pharmaceutical "system" as structured and closely regulated by the U.S. Government and FDA.
Of course that "system" is corrupt, greatly harming consumers.

The price-gouging is normal for this U.S. system. Prices for the commonly used brand-name drugs in the US surged 164% between 2008 and 2015... far beyond the 12% CPI increase. Even the average price of insulin went up 300% between 2002 and 2013.

The FDA creates and enforces private monopolies; monopolies gouge buyers. FDA and its Congressional overlords are the wrong-doers. Mylan is merely dealing with government reality, though Mylan is especially fond of lobbying the wrong-doers.

Heather Bresch, chief executive of Mylan, Inc. © Alex Gallardo Political injection: EpiPen maker offers discount after public outrage

"Of course that “system” is corrupt, greatly harming consumers."

A small number of consumers...and it greatly benefits a likely greater number of shareholders. Who decreed that consumers are more deserving than shareholders?

"Who decreed that consumers are more deserving than shareholders?"

Ok, I get that you're trolling , but hey I'll oblige. By almost any standard of human rights or hierarchy of needs, consumers would be more deserving than shareholders, particularly given the specific product.

But let's explore a little further. The shareholders only benefit from Mylan due to the corporate structure. And all of the rights provided to Mylan exist solely within the legal framework created within a specific governmental entity, which exists to serve the public. Corporations were not created to serve shareholders--shareholders were created to enable to the corporation to exist and by consequence incentives were created to encourage them to invest.

But again, you're also ignoring the concept that I pointed out earlier which is that you can only hold these positions if you treat the corporation as a closed system. Meaning that selfish behavior does not have an impact on external, but related systems. If that were true, great strategy. But sadly, we live in a system of systems where selfish behavior has negative impacts on the environment in which any system operates.

I find it odd that you seem to ignore that--the potential consequences of this behavior--I doubt the shareholders feel like price gouging is a good idea for the long-term health of the company. Nothing spurs competitive entrants more than opportunities for arbitrage. Price gouge and consumers look for alternatives. Yes there are barriers but you can bet the market will find a way around them.

I'm also curious about this statement: "A small number of consumers"

There were 3.6M Americans prescribed an epi-pen in 2015. There are 953 equity owners in Mylan as of today. Granted that most of those are funds and institutions which have a large downstream impact on individuals that benefit from those institutions, but don't act like there is a 1:1 comparison.

We're talking about an individual consumer bearing the cost of $600 vs a very diluted impact of not being able to charge that unjustified price across all of the funds and institutions that benefit.

I don't know what "trolling" is.

"By almost any standard of human rights or hierarchy of needs, consumers would be more deserving than shareholders."

That seems a rather nebulous subjective standard for determining desert.

"...all of the rights provided to Mylan exist solely within the legal framework created within a specific governmental entity, which exists to serve the public."

That seems to be a more objective and generally agreed upon standard...and Mylan did not violate it.

"Corporations were not created to serve shareholder..."

OK, the stakeholder argument. Mylan's actions benefitted many stakeholders beyond just shareholders...i.e., employees, vendors and even consumers in providing the product. The consumers were likely not even harmed significantly because most probably had insurance (and yes, insurance costs go up...but that only further dilutes any harm).

Mylan's only *crime* was in raising prices a visibly large percent that offended the sensibilities of folks who have no vested interest in the issue and bear no cost from their righteous indignation.

Who decreed that consumers are more deserving than shareholders?

That's not the moral issue. If Coca-Cola wants to double or triple its prices, and some people can't afford it, but the company makes more money, fine.

But here the consumer is someone with a possibly life-threatening health problem. So there is a difference.

Who decreed that consumers are more deserving than shareholders?

Who decreed that shareholders are deserving of government-protected profits? The reason Mylan is able to charge these prices is that it is a protected monopoly. Now, Alex's point here is that the system that protects that monopoly is doing a poor job of looking out for the public and needs perhaps drastic changes.

But in the meantime, there it is, and if we started this afternoon the changes would still take a long time. So it seems perfectly legitimate, desirable even, for the same government to tell Mylan that there is a limit to the extent to which it can profit from that protection, and that such a limit is in the public good. We are not talking about chairs but about a medical product that can save lives.

Price-gouging is not a thing. It is an epithet used by critics. It's like the word "cult". The Church of Scientology is often called a cult by its critics. I've even heard of the Mormon and Catholic churches being called a cult. It's always the other guy's religion which is a cult. And it's always the guy you're buying from who is price-gouging.

Yeah, companies that would extract rents or monopoly profits if they could simply do not even exist.

Working around medical research, I can get pretty conflicted about this. Depending on the day, I can be sympathetic to harmonization, deregulation, regulation,... you'd like everybody to be a well-informed and -intentioned consumer, and all the manufacturers to be exerting best effort, so there is no need for any pharmaceutical regulation of any sort. Also, for health insurance to completely go away and for medical costs to become sane, supported by charity sometimes (as are food and clothing) but otherwise affordable, to even the less prosperous.

Meanwhile, shoddy workmanship and questionable claims dominate even the regulated industry (and biomedical research), to say nothing of 'herbal supplements.' Consumers aren't innocent victims, either. Prescription drug abuse is rife, the savings rate is abysmal, and most deaths from chairs are probably from standing on them; thank goodness people don't use epi-pens as pogo sticks.

There's an inherent tension, where what's needlessly burdensome to the educated, rational and informed, is necessary for the left tail of the bell curve. If you're have a PhD in economics, you're probably not falling for some guy selling magic berries which will "totally cure your cancer." Efficacy testing by the FDA is pretty much a waste. You can read the peer-reviewed articles for yourself and come to an informed decision. If your name is Billy-Bob, you live in Eastern Kentucky and dropped out of 7th grade, it's a different story. To you "p-value" is what you pay for clean piss to sneak into a drug test. A kick-ass picture on the label and an endorsement by your favorite Snapchat model means a lot more than a comprehensive meta-study in the BMJ.

"…when was the last time that America’s chair industry hiked the price of chairs 400%"

I don't know about America, but the price of, say, Barcelona Chairs are currently going through the roof in Europe due to a new EU regulation extending Mies van der Rohe's estate's copyright until 2039. From The Guardian last month:

"Buy your design classic now – it’s about to rocket in price

"Changes to copyright laws in the UK and EU mean that cheaper replicas of the Barcelona chair or an Eileen Gray table will no longer be available"

I bet there are a lot of Barcelona chairs in Brussels :-)

Does the US even permit copyright on furniture designs? IANAL, but I'm pretty sure we don't allow copyrighting/trademarking/whatever for fashion designs, and furniture designs seem analogous.

International harmonization when it comes to IP law is quite pernicious, since history suggests that the "Schelling point" for IP provisions in trade agreements is the policy of whichever party to the agreement has the most restrictive protections. That's why I am a TPP and TTIP skeptic; I think the negative effects of locking in dumb IP protections globally quite possibly outweigh any marginal gains from slightly lowering remaining tariff barriers.

By the way, the Barcelona chair doesn't look especially comfortable. But the Eames chair certainly is; my parents own one, inherited from my grandmother, but I'm not sure if it's original or a knock off.

"At the end of the rug, there it would be… The Barcelona Chair. The Platonic ideal of chair, it was pure Worker Housing leather and stainless steel, the most perfect piece of furniture design in the 20th century. When you saw that holy object on the sisal rug you knew you were in a household where a fledgling architect and his young wife had sacrificed everything to bring the symbol of the godly mission (modernism) into their home. Five hundred and fifty dollars! She had even given up the diaper service and was doing the diapers by hand.” -- Tom Wolfe, From Bauhaus to Our House, 1981

Boy did TW get that right! The Barcelona Chair, like the Mies building, is one of the most godawful pieces of design ever. Thankfully the Worker Housing era seems to be about over.

The U.S. does not have copyright protection for useful articles such as furniture, or for fashion. However, these can be protected by design patents (shorter in length and more expensive to get)

The US has design patents, but are closer in idea to trade marks than utility patents. (Except for the time frame. 20 years and that's it.) They can't be for anything functional, just for distinctive looks. The Coke bottle is the typical example.

Design patents last 15 years. I would not say they are more similar to trademarks than utility patents. They use almost the exact same legal structure as utility patents.

There is another epinephrine auto-injector device on the market called Adrenaclick, with nearly 200,000 prescriptions for its generic version last year. Docs can prescribe it and patients can obtain this alternative. And insurers should be switching to cover this auto-injector in response to Mylan's decision to raise prices by over 600%. In addition, another competing product which had been approved by the FDA was voluntarily taken off the market last year because it wasn't working, delivering the wrong amount of medication (oops!). Finally, Teva's application to market a generic version of Epi-Pen was rejected by FDA because it also wasn't working properly.

The assertion that this is about cronyism or some such is nonsense. Guess what, FDA doesn't approve products that don't work. It's their job, as outlined in the law. I'm fine with the idea of reciprocity in emergency situations (though this is a pricing issue, so I'm not sure it would count), but Congress needs to change the law--FDA cannot simply start clearing drugs marketed in other countries. More importantly, Alex's incessant moaning about the FDA in general and in this case "bending the law for favor cronies" is completely misguided, as usual. I'm really surprised one who is so completely uninformed about medical product regulation feels like he can add anything to the dialogue by pontificating about it on his blog from a place of ignorance.

Do you have anything besides your strong prior to say that Tabarrok's talking about this from a "place of ignorance"? (as opposed to you, who is clearly offering something that the articles above didn't include)

'from a “place of ignorance”'

Well, willful blindness is probably a much more accurate way of phrasing it.

Did you read what I just wrote? Do you want me to disprove cronyism? Have you read any of Alex's posts on FDA? Go through the archives and I think you will get a flavor for what I am talking about--I have responded to most of those posts in the comments. He seems to think 1) FDA should not exist, 2) FDA can act unilaterally to do things that are not allowed by law. This is not to mention whether any of his specific ideas have evidence to show they would make drugs and devices any more accessible, cheaper or safer.

'Do you want me to disprove cronyism?'

Come now, the the Bartley J. Madden Chair in Economics at the Mercatus Center has no idea what cronyism looks like, nor how it could possibly function in the marketplace of ideas peddled by public policy institutes.

I don't see any support for #2. #1 sure, many people agree. But to say he is completely ignorant on the subject is bizarre considering the amount of research he has done in the area.

Did you read what I just wrote?

Why should he read your comment when you didn't read the linked article?

And of course there’s a catch. With ordinary medications, pharmacists are allowed to interpret prescriptions for a brand name as prescriptions for the generic unless doctors ask them not to. For example, if I write a prescription for “Prozac”, a pharmacist knows that I mean anything containing fluoxetine, the chemical ingredient sold under the Prozac brand. ...

EpiPens are protected from this substitution. If a doctor writes a prescription for “EpiPen”, the pharmacist must give an EpiPen-brand EpiPen, not an Adrenaclick-brand EpiPen. This is apparently so that children who have learned how to use an EpiPen don’t have to relearn how to use an entirely different device (hint: jam the pointy end into your body). ...

EpiPen manufacturer Mylan Inc spends about a million dollars on lobbying per year. tells us what bills got all that money. They seem to have given the most to defeat S.214, the “Preserve Access to Affordable Generics Act”. The bill would ban pharmaceutical companies from bribing generic companies not to create generic drugs.

I get that you get annoyed by Alex's "ooh, IP laws, cronyism" broken record bit. But it looks like the EpiPen manufacturers have done everything they can to stop competitors from legally entering.

"FDA cannot simply start clearing drugs marketed in other countries"

Do we really think that Germany's equivalent of the FDA is so bad? Granted, I am not very eager to use drugs from China, but I would think that there are some FDA-equivalents that are okay.

You misinterpret Jan. He means the the FDA cannot legally do this. Hence the preceding clause that "Congress needs to change the law".

'Do we really think that Germany’s equivalent of the FDA is so bad?'

Well, the Bartley J. Madden Chair in Economics at the Mercatus Center has no problems with drug companies being free to choose the regulator that best suits them in places like Japan and the EU.

It is extremely likely he would have a problem with how the German Krankenkassen (the major health insurers as represented by the GKV-Spitzenverband) told Gilead that they would not buy Sovaldi at the American list price, period. He would probably find it even worse how the GKV forced a further rebate from Gilead.

A quick translation from -

'The GKV-Spitzenverband is the central representative of the (major) health and care insurers in Germany, and at the European and international level as well. It creates the framework for competition regarding the quality and costs in connection with health and long term nursing care. The health of 70 million insured people is the central focus of its activities. / Der GKV-Spitzenverband ist die zentrale Interessenvertretung der gesetzlichen Kranken- und Pflegekassen in Deutschland und auf europäischer sowie internationaler Ebene. Er gestaltet die Rahmenbedingungen für einen intensiven Wettbewerb um Qualität und Wirtschaftlichkeit in der gesundheitlichen und pflegerischen Versorgung. Die Gesundheit der 70 Millionen Versicherten steht dabei im Mittelpunkt seines Handelns.'

Though who knows? It essentially represents corporate interests in terms of the Krankenkassen, so he might be fine with it, not being the sort of people likely to feel that every aspect of health care be governed by a gun.

Why would he have any problems with that whatsoever?

>The assertion that this is about cronyism or some such is nonsense. Guess what, FDA doesn’t approve products that don’t work.

And European regulators do? If not, how is it that they have 8 competing products in Europe?

Clearly, because the Europeans are just piggybacking on American research from a couple of decades ago, right?

Which makes reading this timeline fascinating -

'In 2009 Teva Pharmaceuticals filed an ANDA to market a generic EpiPen in collaboration with Antares Pharma Inc, a maker of injection systems; Pfizer and King sued them for infringing US Patent 7,449,012 that was due to expire in 2025; Pfizer, Mylan, and Teva settled in April 2012 in a deal that allowed Teva to start selling the device in mid-2015, pending FDA approval.

In 2009 Intelliject, a US startup developing a new epinephrine autoinjector, licensed their product to Sanofi.

In 2010 Sciele/Shionogi faced a recall of Twinject devices and launched Adrenaclick, a modified version of the Twinject that could deliver only one dose.

In 2010 Pfizer and King sued Novartis' Sandoz generic unit for patent infringement after Sandoz submitted an ANDA to sell a generic EpiPen. In response, Sandoz challenged the validity of the patents, and as of July 2016 this litigation was ongoing.

In 2010, European regulators approved Twinject, and also approved a new epinephrine autoinjector made by ALK and sold under the brand name Jext. Jext was launched in the European Union in September 2011.

In 2011 Pfizer and King sued Intelliject and Sanofi after the companies filed a 505(b)(2) New Drug Application for the product, then known as "e-cue"; Pfizer, Mylan and Sanofi settled in 2012 under a deal that allowed the device to enter the market no earlier than November 2012, pending FDA approval.'

Do note how often Pfizer and King and sued are connected, though generally unsuccessfully over time, as the FDA continued to grant generic approval to other manufacturers.

The assertion that this is about cronyism or some such is nonsense. Guess what, FDA doesn’t approve products that don’t work

One thing you're obscuring is that the FDA can and does avoid approving products that do, and Scott Alexander provided several examples of this regarding epipen in the referenced article.

The existence of Adrenaclick causes me to ask the libertarians in the room why that product is not more widely used. Can you figure out a way to blame the FDA?

Jan wrote,

>another competing product which had been approved by the FDA was voluntarily taken off the market last year because it wasn’t working

>FDA doesn’t approve products that don’t work

Which is it?

Isn't your 'example' proving the opposite of what you want?

Unregulated chairs kill people.

Regulated medical product does not.

Seems on its face like an argument for regulation rather than against, unless you instead intended the point to be that the product that causes no deaths is safe enough not to be regulated particularly when compared to a product we don't regulate that causes some small but non-zero number of deaths.

But then the question is 'how many deaths from the medical product would occur if we didn't regulate it' which you don't address at all.

My own gut tells me that the number of deaths would be high, but offset by other benefits. That, though, is the critical question and you completely avoided it.

'But then the question is ‘how many deaths from the medical product would occur if we didn’t regulate it’ which you don’t address at all.'

Come now, we all die. But think of the tragedy of terminal cancer patients unable to buy Laetrile just because the FDA has yet to approve this true miracle of modern cancer cures. Well, along with things like this - 'A 2011 systematic review from the Cochrane Collaboration found:

The claims that laetrile or amygdalin have beneficial effects for cancer patients are not currently supported by sound clinical data. There is a considerable risk of serious adverse effects from cyanide poisoning after laetrile or amygdalin, especially after oral ingestion. The risk–benefit balance of laetrile or amygdalin as a treatment for cancer is therefore unambiguously negative.

The authors also recommended, on ethical grounds, that no further clinical research into laetrile or amygdalin be conducted.

Given the lack of evidence, laetrile has not been approved by the U.S. Food and Drug Administration.

The U.S. National Institutes of Health evaluated the evidence separately and concluded that clinical trials of amygdalin showed little or no effect against cancer. For example, a 1982 trial by the Mayo Clinic of 175 patients found that tumor size had increased in all but one patient. The authors reported that "the hazards of amygdalin therapy were evidenced in several patients by symptoms of cyanide toxicity or by blood cyanide levels approaching the lethal range."

The study concluded "Patients exposed to this agent should be instructed about the danger of cyanide poisoning, and their blood cyanide levels should be carefully monitored. Amygdalin (Laetrile) is a toxic drug that is not effective as a cancer treatment".

Additionally, "No controlled clinical trials (trials that compare groups of patients who receive the new treatment to groups who do not) of laetrile have been reported."

The side effects of laetrile treatment are the symptoms of cyanide poisoning. These symptoms include: nausea and vomiting, headache, dizziness, cherry red skin color, liver damage, abnormally low blood pressure, droopy upper eyelid, trouble walking due to damaged nerves, fever, mental confusion, coma, and death.'

The FDA, yet again keeping American citizens from using their freedom to poison themselves with cyanide and to pay for the privilege. Probably because the FDA likely believes that every aspect of food and drug production and use be governed by a gun.

Not to be callous, but I imagine cyanide poisoning is rather less painful than the average cancer death

I mean there's the case of Vioxx where 50000 people died and no one at the FDA noticed.

You really should quote from that link, you know, like this - 'Due to the findings of its own APPROVe study, Merck publicly announced its voluntary withdrawal of the drug from the market worldwide on September 30, 2004.[36]

In addition to its own studies, on September 23, 2004, Merck apparently received information about new research by the FDA that supported previous findings of increased risk of heart attack among rofecoxib users (Grassley, 2004). FDA analysts estimated that Vioxx caused between 88,000 and 139,000 heart attacks, 30 to 40 percent of which were probably fatal, in the five years the drug was on the market.'

Or this nice piece of explanation that how mistakes were made, but of only the good natured sort - 'In 2005, Merck retained Debevoise & Plimpton LLP to investigate Vioxx study results and communications conducted by Merck. Through the report, it was found that Merck's senior management acted in good faith, and that the confusion over the clinical safety of Vioxx was due to the sales team's overzealous behavior. The report that was filed gave a timeline of the events surrounding Vioxx and showed that Merck intended to operate honestly throughout the process. Any mistakes that were made regarding the mishandling of clinical trial results and withholding of information was the result of oversight, not malicious behavior. The Martin Report did conclude that the Merck's marketing team exaggerated the safety of Vioxx and replaced truthful information with sales tactics.'

Do note that 'mishandling of clinical trial results and withholding of information' part - obviously, trusting a private drug company to care about anything but its profits was the sort of mistake that the FDA was truly guilty of in this case.

I would quote if the software better formatted quotes. Right now it's not worth it. Regardless, your conclusion supports the uselessness theory of the FDA. I believe in sensible regulation; the FDA is far removed from sensible.

A doctor told me that the benefits of Vioxx to rheumatoid arthritis patients are so large that essentially all of them say they would tolerate a 0.75% per year greater chance of a heart attack in order to get the benefit. Basically you go from being a RA cripple to being roughly normal.

Consumer deaths caused by mal-functioning epipen substitutes would hardly be a quiet occurrence. Instead of pointing out past pharmaceutical mishaps and company responses, just think of the logic of consumer sovereignty applied to life or death products.

The death count not included in epi-pen malfunctions is those who die without any epi-pen at all. To the extent someone chooses to take the risk of not having an epi-pen (who needs one) because the price is too high, then they die a preventable death, that blame can't be placed on the FDA.

As opposed to a purely FDA issue, I see this as more of an IP abuse.

"To the extent someone chooses to take the risk of not having an epi-pen (who needs one) because the price is too high, then they die a preventable death, that blame can’t be placed on the FDA."

The FDA pressured Auvi-Q off the market and rejected approval for Teva's generic. If someone dies because the EpiPen is too expensive it is indeed blood on the hands of the FDA.

Honestly it's not clear in this case how that applies, since there is already a generic. I guess they should relax the prescription rule about substituting the generic? It seems the approval itslef is not the issue here although still bogus.

Lessening competition is going to raise prices even if you don't zero out competition.

Absolutely, I just meant from the FDA's point of view. Say the FDA approves a bad product and then that product malfunctioning results in a death. They could be directly blamed for that death. However, if the someone dies because of a lack of having any product, the FDA won't necessarily be directly looked at as having blame. After all, the person could have paid the higher price and had an epi-pen. Same logic applies to an experimental drug or treatment. So I agree with you, I just didn't say it well.

Okay, I get you. Thanks.

Finally, the Bartley J. Madden Chair in Economics at the Mercatus Center has come out in favor of the freedom for American patients to purchase Indian generic Sovaldi. Or even the German version, which still came with a nice 25% price reduction when first introduced compared to the American course of treatment.

Oh wait, of course he didn't.

What a wonderful opportunity to explore the incoherence of the libertarian fetishization of "property rights" over all other forms of government intervention!

The excerpt above seems to have completely missed the fact that the FDA is a wholly different entity from the USPTO. FDA regulations are one half of the problem being discussed; the other is patent monopolies on drugs (but not chairs).

But of course, patents are "property" and so could only result in goody goody free-market utopia, whereas FDA regulations are bad bad government intervention and so are responsible for all evil in the world.

What's a libertarian to do when the patent system appears to be contributing at least as much, if not more, to price distortions and inefficient allocation of resources as FDA regs? Why, blame the whole mess on the FDA regs and ignore the patent system entirely, of course, even if the narrative now makes no sense!

".... the other is patent monopolies on drugs (but not chairs)."

Alex T., regularly posts articles on the problems with the patent system.

You can patent a chair. Patents on drugs are absolutely essential. Without them you would have no new drugs.

"Patents on drugs are absolutely essential. Without them you would have no new drugs."

This is at best, an unfounded assertion, and shows a complete lack of understanding of the breadth of research in intellectual property. The idea that innovation only occurs in the presence of a government granted limited monopoly is a fallacy that has been debunked repeatedly if you are willing to research the domain.

A few things of note: the research on which drugs are based is funded primarily by taxpayers. You cannot discard this fact in assertion about the motivations of pharma corporations. Another thing: any basic business or economics course will tell you that there are a number of ways to compete in a market: by innovation/feature, by price, by quality, by brand, by innovation/manufacturing/service methods, and there are other less relevant ways. In the absence of a barrier to entry, the entire history of the human race has shown that when there is a market (e.g., medicine), companies will find ways to meet that market and they will find ways to compete. The only way you can make the statement you did, is if you believe that competition does not drive innovation. The whole, "drugs are too expensive and time-consuming to research" argument is completely destroyed by the first fact above. If the populace needs drugs, the government will find ways to fund and support research (as it does today) to ensure companies can survive long enough to sell the drugs.

The problem is that today, we have established pharma companies that would prefer to extract rents than innovate. How can we blame them, which one is easier and easier to show results to shareholders?

Haha no. It is you who have no understanding whatsoever of the literature on IP. Pharma is the one area where no one disputes that patent protection is needed. This is basic.

Fine, remain ignorant.

Saying I am ignorant does not make it true, unfortunately. I guess lying on the Internet and claiming you have read stuff you have not is fun, good luck with that.

*No one* disputes? Do you really believe that?

I've always been curious about people who insist, that something as absurdly highly demanded as medication and drugs, would simply not get made without monopoly power. Its a weird cognitive dissonance.

If the populace needs drugs, the government will find ways to fund and support research (as it does today) to ensure companies can survive long enough to sell the drugs.

You admitted that government aid is necessary. Patents are simply only way to help provide that aid. If there is no aid at all, then there will be much less incentive to develop new drugs, particularly if there is not likely to be a substantial market for those new drugs.

What is the logical much less real-world support for your statement?

It costs billions of dollars to develop a new drug. That drug can be copied in a trivial manner at very low cost, making it impossible to ever recoup the funds spent on R&D. Since it would be impossible for the company to make a profit on the drug, they would never invest billions in developing it.

Yes, it's almost as though public goods which are expensive to develop but cheap to produce once developed should be funded directly by government rather than funded 95% by government then turned into a source of monopoly rents for the companies that do the last 5%.


I'm not so sure about this. As a simple counter-factual, what about the world of recreational drugs? Look up the term "research chemicals" or "designer drugs". We keep getting an endless pipeline of new intoxicants year after year. The speed that they go from theoretical idea to mass-marketing is pretty breath-taking compared to the pharma industry. Certainly no IP system exists in this space. In fact innovation is even *disincentive* by state action. New recreational drugs, particularly successful drugs, tend to get banned quickly.

When it comes to recreational drugs there certainly is no Great Stagnation at the moment. On the other hand the pace of pharma drug research has slowed dramatically. Dismantling the IP system may slow down the pace of pharma innovation (or it may not). But I think we at least have one empirical data-point that contradicts this assumption.

This is because the drugs quuckly become illegal.

How excitedly self-satisfied were in your head as you typed this?

Moderately. The responses have been gratifying. "But this form of government largesse is NECESSARY, otherwise things wouldn't be good! So patents are okay even if that contradicts everything I've ever said about free markets, the evils of government handouts, etc!" It's about what I expected.

As for the intelligent comments: yes, you can patent a chair, and the market for chairs is such that it is trivially easy for consumers to choose a chair design that does what they need but is off-patent; and yes, some writers here have criticized the patent system and fully appreciate why it is incompatible with libertarianism, but the quoted author in this post seems to have a real blind spot for the role of patents in the drug market and is blaming the FDA for specific phenomena that are entirely a product of the patent system.

' (You’re going to say this is an unfair comparison because drugs are potentially dangerous and chairs aren’t – but 50 people die each year from falling off chairs in Britain alone and as far as I know nobody has ever died from an EpiPen malfunction. '

Sounds like a killer argument for the success of the FDA. The UK needs a furniture and desk association asap.

EpiPen always brings to my mind this supposedly real autocorrect failure. (Why is iPhone's autocorrect so awful?)

Chairs are not a good example.

A shoddy made chair will break and you ask your money back from the seller. If the maker/seller makes too many bad chairs, he's out of business......the market worked =)

But, the market does not solve the snake oil seller problem. People can sell snake-oil for several years and the consumer/market keeps buying placebos. No shaman has gone out business because the client/patient died. Due to human nature (faith, beliefs, manipulation, etc), the market for drugs is broken. The greater risk in new drugs is no that the drug/procedure will kill's that the drug does nothing.

That seems to be what the patent/regulatory system incentivizes: ever newer drugs of dubious efficacy which won't kill you. Drug companies exploit the system's artificial scarcity to make money off a market of people who fear growing old or don't know basic health and nutrition.

"but 50 people die each year from falling off chairs in Britain alone and as far as I know nobody has ever died from an EpiPen malfunction." seems to actually support the pro-regulation argument, instead of proving the author's point.

Only if you think we need a government bureaucracy to regulate and approve chair designs

You got to love the mental gymnastics of libertarians.

While I agree that the FDA has a lot of room for improvement and that all else being equal, less regulation is always better than more regulation, the author's seems to be ignoring reality in order to promote his agenda.

"This year, a company called Adamis decided that in order to get around the patent on devices that inject epinephrine, they would just sell pre-filled epinephrine syringes and let patients inject themselves. The FDA rejected it, noting that the company involved had done several studies but demanding that they do some more."

I haven't used an EpiPen myself, but from what I understand it's not always an option to just use pre-filled syringes when you (or your kid) have a medical issue. If that wasn't the case, there would be no market for EpiPen-like devices.

"(You’re going to say this is an unfair comparison because drugs are potentially dangerous and chairs aren’t – but 50 people die each year from falling off chairs in Britain alone and as far as I know nobody has ever died from an EpiPen malfunction.)"

50 people per year die due to a particular design defect in one type of chair product? Or 50 people happen to die when falling off chairs in a non-standard environment (say a workplace that involves dangerous materials)? Maybe it is due to a specific design defect, who knows? The point is sitting on a chair generally does not require any kind of training, while something like healthcare is infinitely more complex from both a production and consumption perspective.

The real solution (in addition to streamlining FDA regulations to increase competition) would be to have a centralized medicine purchase authority that would negotiate on behalf of all insurance pools. In additional to lower prices, this would reduce the incentive for pharma companies to use regulation to protect their profits as price control would limit the possible benefits from a such a scheme.

It might also help to require companies to prove that a given minor modification in a medical patent is primarily aimed at improving the health of consumers and not just extending their monopoly.

The bit about "voxsplaining" is also super classy, especially considering that he failed to address some of the points raised by the Vox author (healthcare tends to be inelastic - in such an environment prices will go up if there is no regulation).

But this is all commie, pinko BS, right? :)

Yes, it is actually. There is no basis whatsoever to the claim that in inelastic demand environments prices will go up in the absence of regulation. Furthermore, an improvement patent does not "extend" patent protection- it protects only the improved drug/device, not the original one.

The original comment had a valid point about patents. The original product loses patent protection, but the new one has patent protection and becomes the "branded product".

The original version disappears from the market place or becomes hard to obtain for demonstrating equivalency. Then generic competitors must imitate the new product to become valid substitutes; but patents forbid this. The competitor thus must register as a new drug or new device (depending on the case) and the doctor must explicitly prescribe the alternative; i.e. the pharmacy can't just substitute it.

Being forced to demonstrate equivalency, and pharmacists being unable to substitute in an older version that does the same thing are also regulations. Your argument is something like: we must pass a new law to prevent companies from acquiring patents for minor improvements because it doesn't work well with the other non-sensible laws we already have on the books.

There is no basis whatsoever to the claim that in inelastic demand environments prices will go up in the absence of regulation.

As a matter of basic theory, monopoly prices will always rise to the elastic region of the demand curve (at zero MC it stops at unit elasticity). Charging an inelastic price is foolish. If a 1% price increase reduces sales volume by less than 1% then it obviously makes sense to go up, until you get so high that the lost sales cost more than the price increase gains. IOW, if demand is inelastic, a price increase makes revenue go up, and, at a minimum, does not increase costs.

Of course 50 people don't die due to defective chairs.

Another unique aspect of the US regulatory system is the jury, people selected because they know absolutely nothing about what is at issue, which effectively can decide whether a product should have been brought to market.

That's true of the tort system as a whole which is really the legal system and not regulatory system

At an opportunity cost of $600, most adults of normal cognitive skills could be bothered to learn how to use a syringe.

A couple of things:
1) If someone dies due to an epipen failure, we may never find out. The Epipen needle goes in, but the amount delivered is too small or the medicine is of the wrong strength, and the person dies. Would someone likely determine whether this was just due to the fact that the medicine is less than 100% effective or was delivered too late vs due to an Epipen failure or user error?

Also the line between user error and device failure can be murky.

2) Most people don't want to have to do their own meta-analyses of reviews and studies of drugs to determine what is effective. Even doctors don't have time and rely on various third parties, including the vendors.

Sorry libertarians, just because the system has weaknesses does not mean it should be dismantled.

"2) Most people don’t want to have to do their own meta-analyses of reviews and studies of drugs to determine what is effective. Even doctors don’t have time and rely on various third parties, including the vendors."

What are you saying would happen in a libertarian world without the FDA? I agree that most people don't have the time or the ability to do their own meta analyses, so what do you think people would do instead?

Better question, if you have the ability to study the drugs and enough reputation for consumers to trust you, do you think others would pay you to study the drugs?

"Sorry libertarians, just because the system has weaknesses does not mean it should be dismantled."
You can get behind literally any policy with the statement "I know it has weaknesses, but doesn't mean it should be dismantled". So tell us under what conditions the FDA *can* be dismantled.

Usually, something gets dismantled when costs exceed benefits, or when there is a better way to do things.

You’re going to say this is an unfair comparison because drugs are potentially dangerous and chairs aren’t – but 50 people die each year from falling off chairs in Britain alone and as far as I know nobody has ever died from an EpiPen malfunction.

Stupid snark. The harm comes from the lack of an EpiPen, not a malfunction.

And the link is wrong.

Seriously, what kind of person ignore the difference between safety issues related to chairs and medicines? Should nuclear power industry not be regulated because the chair industry is not regulated?

That wasn't the point of the essay. It was a counter to Vox's "how in the world could the price go up by 300%?%?%!?!!11" The answer is that Mylan has been very successful at keeping other players out of the market through the FDA and the legal system.

Canada Health takes LONGER to approve new drugs than the FDA, but the price of an epi-pen in Canada is $100. Clearly the author has missed something.

...(You’re going to say this is an unfair comparison because drugs are potentially dangerous and chairs aren’t – but 50 people die each year from falling off chairs in Britain alone and as far as I know nobody has ever died from an EpiPen malfunction.)...

Far from proving the author's point, this demonstrates the value of the FDA.

The pharmaceutical industry has devoted such enormous resources to manipulating the market that simplistic explanations will not unravel the mess. The FDA may be one pawn in the game, but it is not the game.

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