MM5003-Marketing Management Lecture: Ir. Budi P.

Iskandar, MSP

Pricing The EpiPen: This is going to Sting

1. What should Heather Bresch do? Why? What risks do you see with this plan of action?

Answer:

She had a lot of pressure from public, media and congress due to pricing for EpiPens that increase up to
500% within 7 years period and also the Mylan share was start to decreased about 10% and she need to
stop this trend further. She need to answer all questions and respond shortly for this situation in order
to safe Mylan as well as her career from this issue. Following are that she needs to do:

a. Request congress to visit the procedures, regulations and government policy for drugs
distribution chain in US as well as price control system in US and Pharmacy Benefit
Managers (PBMs) as the middleman who bridge the gap between drug manufactures,
insurance companies and pharmacies are one of the players who are most at fault creating
opacity in the US health system. Seem these are the most critical factor for EpiPens’s
pricing.

b. Explain the factors that contribute to increase the EpiPens price:

• Cost of advertisement and advocacy effort to FDA and school in order EpiPens to be
available in school were for dramatically increasing awareness and use of EpiPens.
• Cost of R&D aimed at improving the Epipem.
• Opacity and complexity of the drugs distribution chain in the US resulted in higher
price.

c. Explain what Mylan were did to respond the pricing condition:

• New generic product being developed and price 50% less than the ordinary EpiPens.
• New saving vouchers had been introduces which offered the patient up to 50% of
the price their co-pay of EpiPens

d. Answer the congress questions soon to show the positive respond to them regarding:
• Mylan in determining the pricing for EpiPens.
• Mylan’s advertising budget for EpiPens in first half2016 as well as 2015
• Explain the changes Mylan has made to EpiPens since the acquisition that have
caused it to increase the prices and reflects the value the product provides
• Monetary assistance to patient as well as to NGO (if any)
• Assistance program to school to purchase EpiPens in order to use without
prescription in emergency situation. How many school across US have used the shis
system in past 5 years (if any)?

The EpiPens had fewer competitors in the market, some competitor pricing their product lower than
EpiPens but public still loyal with EpiPens (there a behavior from public do not interesting to change
to other product). EpiPens had strong branding image.
When demand is high and the product had strong branding image with consumer loyalty level is
high then consumer will have “willingness to pay” whatever the price is.

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MM5003-Marketing Management Lecture: Ir. Budi P. Iskandar, MSP

The risk associated with the plans is Myland was facing the lawsuits and might be fines and EpiPens
might be banned due to facing ethics issue on the pricing that will lead Mylan as top pharmaceutical
company going to down.

2. Does the variation in prices across countries seem reasonable? What would happen if Mylan were
forced to make its prices more consistent?

Answer:

Yes, it does. The variation in prices between EpiPen in US and other countries, it ranges from 20% to
130% (Exhibit 2).
There are numbers of different factors interact in determining the price for a specific drugs like
EpiPen: market for the drug in question, the judgment and business practices of the manufacturer
and the conditions of the wider pharmaceutical market and healthcare system in the country
(procedures, regulations, policies) and this include the chain distribution system.

If Mylan were forced to make its prices more consistent / stabilizes then there will not significant
impact to Mylan’s profit because profit from EpiPen itself should be sufficient (estimated $160 per-
two pack) and the manufacturing coat estimated less than $10 per two pack (source: ; Andreas
Kanaris Miyashiro). It more than 1,600 % profit compared to manufacturing cost.
But it would be impact to PBM as the middleman in US pharmaceutical industry caused this is one
of the most critical factors suspected for pricing hike as well as lack price control in US system need
to be revisit again to determine the strict price control in US.

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