We all pay the high cost of EpiPens

Over the past month, the EpiPen controversy has triggered a national debate on what to do about high drug prices.  The enormous public attention stems from a doubling of the price over a three-year period.  Families with life-threatening allergies can now end up paying more than $600 for a prescription.

Heather Bresch, CEO of the company (Mylan) that makes the EpiPen, blames insurance plans.  She says it's high deductibles that are the root of the problem.  I disagree.  High deductible health plans are not causing the price hikes – they are just making them visible to consumers and the public.

Pharmaceutical companies today are facing the reality that prices are no longer hidden from view.  New data from this year show that 40% of Americans now have health insurance plans with high deductibles.  For a family – this translates to a minimum deductible of $2,500.  That means the first $2,500 of expenses each year are paid out of pocket.  So whereas more generous health insurance plans would have hidden these price increases from view because consumers would have only had to pay part of the actual price – now the prices are not just visible, they are also stressing the finances of families.

So Mylan should not be blaming high deductible plans – its own price increases are the source of the problem.  The solution the company offers – discount cards to lower out-of-pocket costs – are just a way to try to hide the problem from public view again.

Let's take Mylan's recent announcement of the "My EpiPen Savings Card." The card offers savings up to $300.  If your insurance requires that you pay $200 of the total price of $600 for the prescription (either because of your deductible or a co-payment) – you would pay nothing out of pocket if you use the card.  However, your insurance company would still pay exactly the same amount ($400) as if you had not used the card. So the consumer feels like the problem is solved but the insurance company is still paying a high price – the same price whether the consumer uses a discount card or not.  Over the long run, this drives up health insurance costs for everyone as the insurance company raises premiums to keep up with higher prices.

Discount cards and coupons don't seem like a bad thing from the perspective of consumers.  And they do provide important financial relief for families that are struggling to afford medicines.  But they do nothing to solve the underlying problem of high drug prices.  Mylan is not the only company using this strategy – as insurers design benefits to address costs, pharmaceutical companies create discount programs to counter the insurance companies.  In the long run, the consumer loses when all of us pay higher premiums for our health insurance.

Consumers are caught in the middle. Until policymakers find a better answer of what to do about unreasonable price increases for prescription drugs, consumers can search online for discount cards.  Just don't let the discount cards make you believe the problem is solved.  And one other word of caution – when you download these cards, the pharmaceutical companies may be collecting your personal information so they can market directly to you in the future.  But I will leave that topic for a future post.

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Editor's Note: Cross-posted on the HealthPolicy$Sense blog of the Leonard Davis Institute of Health Economics of the University of Pennsylvania.

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