How Generic EpiPen Is Still Going to Make Money for Mylan

By: Dave Roos
Mylan, makers of EpiPen are going to produce a generic version of the drug even though the patent doesn't expire for years. Joe Raedle/Getty Images
Mylan, makers of EpiPen are going to produce a generic version of the drug even though the patent doesn't expire for years. Joe Raedle/Getty Images

Mylan CEO Heather Bresch was set to become the next Martin Shkreli last week, just another greedy pharmaceutical executive charging exorbitant prices for life-saving drugs. Mylan has raised the price for EpiPen — its wildly popular self-injection device for halting life-threatening allergic reactions to nuts or bee stings — a whopping 500 percent since acquiring the drug in 2007. Angry parents were calling for Bresch's head, saying the $600 EpiPen was proof that Mylan cared only for profits, not their children's lives.

Then came a surprise. On Monday, Mylan announced that it would be selling a generic version of the EpiPen identical to the brand-name product, but for exactly half the price. Why would Mylan sell a $300 generic version of its own $600 brand-name product? Has this ever been done before?


Well, sort of.

Patricia Audet, chair of the department of pharmaceutical and health care business at the University of the Sciences in Philadelphia points to the example of Pfizer, which authorized the sale of a generic version of Lipitor — its breakthrough cholesterol-lowering drug — to get a jump on the competition.

Pfizer's patent on Lipitor was set to expire in 2011. Rather than cede the market to a rush of generic "copycats," Pfizer struck a deal with Watson Pharmaceuticals to sell an "authorized generic" version of Lipitor, still manufactured in Pfizer's facilities. In return, Pfizer would collect 70 percent of sales on the "new" generic.

Audet points out that Mylan's situation is different. The EpiPen patent isn't going to expire until 2025, but competitors could take advantage of Mylan's bad press to chip away at EpiPen's near monopoly of the market. The design of the EpiPen auto-injector is patented, but not epinephrine, the active drug.

"Mylan's trying to kill a couple of birds with one stone," says Ed Silverman, senior writer and Pharmalot columnist at STAT. "They're trying to bring a lower-cost version to consumers, and at the same time head off competition from other companies that are expected in the next year or two to sell their own generics."

An Israeli company, Teva Pharmaceuticals, has applied for U.S. Food and Drug Administration approval to sell a generic device similar to the EpiPen, but it's not likely to hit the market until 2017. By releasing a cheaper generic EpiPen now, Mylan could corner the generic market before Teva even gets a foothold.

Mylan CEO Bresch says that her company's decision to offer a half-priced generic was to "ensure that this important product be accessible to anyone who needs it," but Silverman doesn't detect much altruism.

"It's just another tactic to get consumers to pay X amount of dollars," Silverman says. "At the end of the day, the average person — as sophisticated or informed as they attempt to be —will simply know if the product costs less than before. They'll say, 'Oh, it's generic, but it's made by the same company and it's identical, then it must be good."

Mylan has spent millions to "educate" (critics say "lobby") the public and schools about the dangers of anaphylaxis, a life-threatening allergic reaction. Mylan has signed exclusive contracts with schools nationwide to carry EpiPens in every classroom and train teachers and staff how to use them. (Mylan gives each school four free pens and the schools buy the rest at a discount price.) As a result, it's nearly impossible for competing brand-name devices like Adrenaclick, which sells for $400, to get traction. Unlike EpiPen, which can be administered in one shot, Adrenaclick requires a two-step process.

"If you think about schools and teachers, for them to learn how to use two different devices ... just practically speaking, it doesn't happen," says Audet of the University of the Sciences. "It pushes the market ever further toward one brand."

Even at $300 for a two-pack, the generic EpiPen still costs three times as much as it did in 2007. 

Mylan says the generic EpiPens will be on pharmacy shelves in just a few weeks. It remains to be seen whether the price cut is enough to clear Bresch's name and potentially ensure billions in more sales for the pharmaceutical giant.