LEE’S SUMMIT, SEPTEMBER 28, 2016 – EpiPen, Mylan, Heather Bresch, all terms that have become part of the public vernacular and are blamed on Capitalist Corporate Greed: What is missed is that one company’s greed is checked by their competitor’s ability to keep them honest or lose business.
At this moment, congress is about to interfere in the worst possible way: Pricing Regulations. Price controls does not work in housing, it does did not work in the airline industry, it currently does not work with public utilities and it won’t work to reduce the overall cost of healthcare – notice that major players have backed off.
Let’s focus on the issue of the EpiPen pricing, and what it will truly take to bring it down.
In 2007 the EpiPen was part of the German Merck KGaA’s generic drug division. Generic drugs, as you well know, are low cost products that are beyond the majority of the intellectual rights protection. They are still controlled by the FDA, but now competition can come into the market and force the prices down.
Capitalism is the most brutal of all the economic systems. It resembles the natural predator, prey system in nature; commonly states as Survival of the Fittest. Capitalism at first blush has no mercy, and it allows greed to succeed. But, upon second look it is that very same mercilessness that checks the other’s greed and lack of mercy.
If you have a good business plan, you may succeed.
If you have good execution of your business plan, you may succeed.
If you understand your customers and suppliers and the complete logistics chain, you may succeed.
Each of those is a requirement, but in each case they are insufficient in and of their own. You need all three, and you need the ability to take full advantage of opportunities – in some cases opportunities that no one else understands as opportunities.
If you succeed, it is not enough either. You must adjust to the competitive environment. If you are first to market, or if you develop the market in the first place, others will flock to it and do their very best to take it away from you. If they succeed, then you fail and the entire system is better for it.
Where’s the role of government in all of this? The government must keep the playing field level: The laws must be impartial and absolutely fair (meaning equitable) for everyone. The other part is, the government lays down the infrastructure and prevents monopolies. However, if the government picks a winner, or a loser, then the government has gone too far.
The folks at Mylan, benefited from the School Access to Epinephrine Act – which gave preferential federal treatment to schools with abundant supplies of EpiPens. This is congress, passing a law specifically granting, guiding, or giving special preference to one competitor over another – that interferes with the natural predatory nature of Capitalism.
Once most or all the predators are removed from an ecosystem (business is an ecosystem) then those that remain – no matter how weak, set the rules. Mylan has been protected by the FDA: Teva Pharmaceutical Industries has been working on a generic version of the EpiPen. Enter the FDA. The FDA did not approve TEVA’s application in February of 2016 – removing yet another competitor.
The root cause of the EpiPen price disaster is truly our Federal Government, the FDA’s effort to protect the market for Mylan, and the congress for enacting well-meaning laws that interfere with the natural and brutal competitive forces of the Capitalist System.
How to fix the problem:
- Generic Drug’s should have minimal costs to pass FDA – a bonus for companies trying to enter a low cost, low margin, but high volume market.
- FDA should work with anyone trying to produce a competitive system to the EpiPen to encourage new entrants to the market.
- Eliminate the FDA’s practice of supporting long term clients / picking winners and losers.
These three items; and without changing the FDA’s thorough methodology used to protect the patient, will bring the cost of the EpiPen to reasonable levels where a profit can be made, and greed held to a minimum acceptable level – by the abundance of other strong competitors (predators in this ecosystem).
You may say that this will reduce the quality of the products in the market. At the end of the Airline regulation, and price fixing (excuse me, control, I meant to write control) Pan American, Trans World Airlines, Eastern, Braniff and many other fine airlines were either driven out of business or acquired by other more successful airlines. Safety has increased significantly since the days of deregulation in 1978.
Every time the government gets involved in a “for profit” business, the dichotomy of what makes a good politician and a good businessman becomes evident. Business suffers, quality is lowered, competition dries up (think Amtrak) and we are left with an unsustainable situation.
Business is about profit, cost controls, innovation, and execution. Politics is about re-election and finding ways to earn votes. Two extremes that only work if each is focused on the things that they must do.
The Lee’s Summit Conservative