Mike Munoz

Professor Pook Carson

Economics 2010

November 28th,2017

Epipen Disasters

Throughout this online economics course we learned three concepts, price elasticity of

demand, monopoly market structure and barriers that make monopolies, and social/ economic

regulations. These three microeconomic concepts come up when we discuss the situation with

EpiPen. EpiPen is considered to be a life saving medicine for people who have severe allergies.

However, more recently there has been a massive price hike with EpiPen and it has caused a

major issue because it has sparked outrage among consumers and lawmakers who worry

that parents wont be able to afford the pens for children heading back to

school(Kasmauski). Epipen was purchased in 2007 by Mylan who is a pharmacal

company and in less than 10 years they have astronautical risen the price from$ 103.50

to $608.61 (Kasmauski).

If we look at the EpiPen Price-Elasticity of Demand we start to notice something

quite strange with it. When you analyze the market for EpiPen we realize that it has a

Perfectly Inelastic Demand attached to it. With a Perfectly Inelastic demand, the

demand is not affected by any price change and this situation rises when consumers

have no other substitutions for the product. In this case, EpiPen currently has no

substitutes that severe allergic patients can use,so they have to buy this life saving drug,

even if the price much worse. For products who have no close substitutes, consumers

have no overall choices and they are forced to buy the product. This explains why

Mylan pharmaceutical company can get away with having a perfectly inelastic demand,
because if they sadly rise the price, they know that consumers will still purchase the

drug.

After some more research we also start to notice that Mylan's Pharmacal

company have created some factors that allow it to essentially have a monopoly like

power for their EpiPen drug. A monopoly happens when a company controls a certain

market for their product. In the case Mylan controls the whole market for EpiPen

because of some factors that made it possible for them to be able to rise the price

drastically over the last couple of years. According to the washington post, Mylan

benefited from factors including failed competitors, patent protections and laws

requiring allergy medications in schools. In other words, These factors have created

mylan's monopoly power. One of these factors, is the laws that requires schools to allow

allergy medicines. In 2013 ,President Obama signed the School Access to Emergency

Epinephrine Act(Johnson & Ho) which gave incentives to states that made schools have

Epinephrine in stock for people with allergic reactions. Having this law made Mylan's profits

increase ten-folds because states will basically get paid, if they cooperate with this law. Another

factor is failed competition.. Back in 2007, EpiPen was dominant, with its products accounting

for nearly 90 percent of the sales. Another similar product, the Twinject, had $10 million in

sales..(Johnson & Ho). In the end Twinjet had tons of problems like how unappealing and how

it was not working properly. This lead to Twinjet company Teva to discontinue it in

2012(Johnson & ho). Since EpiPen is a very trusted brand, many of its competitors fail

because of mylan's brand awareness. These factors make it possible for EpiPen to act like a

Monopoly.

With this EpiPen price hike issue it has brought a lot of economic policy suggestions to

resolve this serious issue. EpiPen is a lifesaving medicine and it's a considered a social good.
when you sell a medication that saves lives, especially one that is mandated at schools, you are.

You are going to be held to a much higher standard of scrutiny when you raise prices for such a

product, or even introduce it at a price point that supports an obscene profit margin(Solomon).

This should be not happening in our economy, so there must be new economic policies that

should reduce the insane prices of this drug. My economic policy suggestion would be that there

should be a limited patent protection for EpiPen. It's messed up that companies can patent vital

drugs and make tons of profit for their creation. My Policy would limit that patent protection and

give parts of this drugs design to other pharmaceutical companies so that this creates more

competitions, and thus the price will lower.

Overall, this situation that EpiPen has brought to the table can be resolved to reduce the

price. Its up to our lawmakers who are the lifeblood of mylan's profits to change certain laws

around EpiPen so that it can reduce their profits and ultimately lower prices. We need some

change because this is unacceptable that this company can legally get away with what there are

doing to these severe allergic patients. If the lawmakers created this mess, then there must be a

way to reverse the damage that this being done to patients pockets.

Works Cited

Johnson, Carolyn Y., and Catherine Ho. How Mylan, the maker of EpiPen, became a virtual

monopoly. The Washington Post, WP Company, 25 Aug. 2016,

www.washingtonpost.com/business/economy/2016/08/25/7f83728a-6aee-11e6-ba32-

5a4bf5aad4fa_story.html?utm_term=.7d2fc3dded9f.
EpiPen Price Rise Sparks Concern for Allergy Sufferers. Edited by Karen Kasmauski, The

New York Times, The New York Times, 22 Aug. 2016,

well.blogs.nytimes.com/2016/08/22/epipen-price-rise-sparks-concern-for-allergy-

sufferers/?_r=0.

Solomon, Yoram. The Other Side of the EpiPen Price Hike Story. Inc.com, Inc., 24 Aug. 2016,

www.inc.com/yoram-solomon/the-other-side-of-the-epipen-price-hike-story.html.

Reflection

This assignment has made me realize that the things we learned throughout the course

really do happen in real life. Writing this paper about the situation that EpiPen is facing, really

made it think about our economic ideas that can help address the problems. The pricing that
Mylan was creating is a messed up social and economic issue that we are currently facing today.

Overall, I can say that the stuff through the course really helped when writing this paper.