How Mylan Gouged the Pentagon on the Cost of Its Drug Dispenser
Policy + Politics

How Mylan Gouged the Pentagon on the Cost of Its Drug Dispenser

Flickr/Greg Friese

In the ongoing saga of Mylan Corporation’s outrageous pricing of its EpiPen epinephrine auto-injectors for treating potentially lethal allergic reactions, we now know the price hikes have added tens of millions of dollars to Pentagon spending since 2008. 

Ironically, the design of EpiPen was pioneered decades ago by Defense Department engineers, and now Mylan is using the fruits of that research to rake in huge profits at the expense of the taxpayers and the military.  

Related: Mylan EpiPen: One Piece of a Complicated U.S. Pricing System

According to a report on Friday by Reuters, the Defense Department’s spending on the drug dispenser rose from $9 million in 2008 to $57 million today, a remarkable surge in medical spending born of both the drug company’s aggressive marketing strategy and a rising demand for the product within the military.

Like the Veterans’ Affairs Department and other major government agencies and programs, the Pentagon gets a government discount on EpiPen sets that are dispensed at military treatment facilities and by mail order. But according to Reuters, nearly half of the Defense Department’s spending on the dispenser was through retail pharmacies where it recently paid an average of $509 for EpiPen and $528 for EpiPen Jr. two-packs. That was three times higher than the drug dispenser’s discounted rate.

Although the situation is likely to change soon amid mounting public protests, Mylan has held a virtual monopoly over EpiPen since first acquiring the rights to the dispenser in 2007. Mylan Chief Executive Officer Heather Bresch has been sharply criticized by members of Congress, consumer groups and others for raising the list price on a pack of two injectors nearly six-fold since 2008, from roughly $100 to $600.

EpiPen is a cash cow for Mylan, which is expected to generate $1.1 billion in net sales this year. Mylan has sought to defuse criticism of its pricing by announcing plans to bring out a generic version of EpiPen that would cost roughly half the price. And EpiPen is about to get some competition following Kaleo Pharma’s announcement this week that it will reintroduce its auto-injector device Auvi-Q during the first half of 2017.

Related: How Mylan Soaked Medicare and Taxpayers for EpiPen Profits

The injector precisely calibrates the epinephrine dosage used to treat violent allergic reactions to food and nuts, bee stings and other antigens.

The concept of the auto-injector sprang from Pentagon decision-making dating back to the early 1970s. In response to mounting fears of chemical warfare in Iraq, Iran and elsewhere in the Middle East, the Defense Department asked scientists at Survival Technology, Inc., to develop a first-line of defense for troops exposed to nerve gas, according to a report by Timeline.

That order led to the development of a “nerve agent antidote kit” similar to the modern day EpiPen device which can be easily and quickly administered by jabbing the needle-like device into a victim’s leg, arm or chest. Today, a company called Meridian Medical Technologies controls the trademark for the AtroPen, an atropine auto-injector that was designed for the immediate defense against nerve agents.

Related: Will Mylan’s $300 Generic EpiPen Packs Quell Pricing Firestorm

However, access to the device remains highly restricted because of its long-standing military and national security implications.

But one of the engineers who designed the auto-injector, the late Sheldon Kaplan, is widely credited with inventing the EpiPen. His team’s research breakthroughs included changing the cartridge from stainless steel to a non-reactive glass cartridge to better preserve the contents.  Kaplan reportedly anticipated the device’s potential for holding and dispensing epinephrine.

Years later, Mylan acquired the patent for EpiPen from Merck and then returned the Pentagon’s favor by jacking up its prices.