The EpiPen Debate Reveals Gap in Industry's Pricing Defense

There are two major implications of Mylan’s massive markup of EpiPen prices and of an even more outrageous markup by Turing Pharmaceuticals before that.

The first is that third-party insurance health coverage does, indeed, need to be universal; and the second is that medicines simply cannot be subject to the market forces that dictate the prices of other commodities.

There is and has always been a very strong argument for universal healthcare coverage, and it has nothing to do with liberal versus conservative, this partisan view or that. It has everything to do with common, human decency — and shark attacks.

We’ll come back to drugs, but let’s consider shark attacks first. You can picture the scene on the beach: a mangled limb, blood everywhere, a frantic crowd. The victim, we may presume, is unconscious.

Would any conception of American ideals allow for verifying the victim’s insurance status before granting him or her the privilege of an ambulance ride? Would any version of basic human decency allow for guaranteeing their capacity to pay, before doing surgery to save a limb or a life?

Those questions are rhetorical, of course; there should be no need to ask them, let alone answer them. The ramifications, however, spread out in all directions — rather like that blood in the water.

What other thing than life or limb-saving medical intervention is ever “purchased” by an unconscious consumer? At what other time does the “system” decide on your behalf that you are going to have an elaborate intervention at a cost of many tens of thousands of dollars you don’t have?

These answers are obvious, too: nothing, and never. Healthcare is nothing like any other commodity subject to market forces. At times, you wind up “buying” healthcare you never wanted, and without making any conscious decision. At times, you would die but for services you cannot possibly afford.

There is an interesting parallel in the realm of other public goods, and one I don’t see routinely drawn. Imagine a hostage situation and a rescue attempt by the special forces of the police or military. Now imagine that some of the hostages are employed and paying taxes, but some are not. Perhaps the hostages not paying for police services could be left to the mercies of their captors. Perhaps they could be sent a bill afterward.

We don’t do that, and I don’t recall a single instance of a conservative thinker suggesting we should. All of us who can contribute to the costs of our security do so, and then everyone benefits from it. It is a public good.

So, too, is healthcare — or at least a portion of it.

When the Obama administration was first wrestling with healthcare reform, my colleagues and I published a paper in the Annals of Internal Medicine, calling for the differential treatment of healthcare coverage by tiers.

We proposed three tiers: essential care, non-essential care, and discretionary, or “luxury” care. Tier 1 would include all interventions urgently required to address matters of life and limb, as well as preventive services recommended by the US Preventive Services Task Force, such as colon cancer screening, various immunizations, and so on. Everything in this tier, we argued, should be fully covered for everyone out of a universal fund.

That this makes humanistic sense is rather obvious, but the case can be argued in purely pecuniary terms as well. Some years ago, I was providing medical care in a homeless shelter and met a young mother severely disabled by heart failure. Her heart failure was the product of a pulmonary embolism, which in turn was the unnecessary consequence of a neglected blood clot in her leg. It was a DVT, or deep vein thrombosis. Why had her blood clot been neglected? Because when her calf began to ache, she tried to tough it out — because she had no doctor, no money, and no insurance.

What happened? When the neglected clot sent shards into her lungs, threatening her life, the shelter called 911 — and the patient was taken by ambulance and wound up in the ICU for weeks. The patient’s health was destroyed forever, and the hospital, and taxpayers, were left holding the bag for a bill that ran into the hundreds of thousands of dollars. Everyone lost. With treatment of the DVT, much less would have been spent on a dramatically better outcome.

But, of course, not everything in healthcare is so essential. Treatments to address symptoms, such as a cough or an itch, for instance, are important — but not absolute requirements. The idea of a co-pay here is not outrageous, so that people think twice before shopping in Tier 2. And finally, there are purely cosmetic treatments, and related indulgences, that are as discretionary as buying new clothes or spa treatments. Here, as elsewhere in the economy, it seems reasonable to let the ability to pay exert its customary influence.

There is nothing about an EpiPen needed against the advent of anaphylaxis that is like picking up the hot new album on iTunes. And the failure to provide an essential treatment upfront can result in high costs for all concerned. When anaphylaxis happens to a child whose family could not afford the egregiously marked-up EpiPen, that child will certainly be the beneficiary of vastly more expensive emergency care they can afford even less. Again, everyone loses.

Standard economic concerns like price elasticity fall out of the equation when people simply have no choices. No one buys an EpiPen for fun, and those who can’t afford it can afford even less the consequences of not having it when needed. Our society can’t afford such misguided penury either, both because it is at odds with the principles of decency and humanism we espouse, and because it makes us penny wise and pound foolish. As a nation, we spend more to produce worse outcomes.

Medicines, and medical care, are simply not like the other commodities that populate a free market economy. Treating them as such makes for ill-conceived liaisons, dangerous to us all.