Beyond Milan: FDA Efficacy Requirements Hurt the Poor
Contrary to the popular belief that the U.S. Food and Drug Administration (FDA) protects American consumers from dangerous drugs produced by malicious drug companies, FDA drug regulations actually benefit big pharma. And this benefit occurs by increasing the cost of prescription drugs for the poorest Americans. We can see this injustice in the recent EpiPen controversy.
The drug company Mylan recently announced that they were increasing the price of their drug known as the EpiPen by nearly 500 percent since 2007. The EpiPen is a device that allows someone suffering from potentially fatal allergy symptoms to inject epinephrine into their system, reducing the symptoms and possibly saving their life. Since the drug is widely used and so important for many people, the price increase ignited a political and media firestorm. Pundits from both sides of the aisle are outraged, saying that the company should be forced to lower the price.
But the drug company is not the only organization at fault. Like any other corporation, Mylan is in business to make money. The FDA, on the other hand, whose official vision is that “public health is advanced and protected,” goes against this mission every day.
When considering whether to allow a new drug onto the market, the FDA forces new drugs to go through two tests. First, they must be safe and not invoke any serious undesirable side effects, even in individuals without the targeted medical condition. Second, the drugs must be effective. This means that the drug must actually treat the medical issue that its producers claim that it treats. If there is already another similar drug on the market, the new drug must be proven to be more effective than the current one.
This second requirement creates a serious problem for public health. While it is important for patients to be protected from fraud, the efficacy requirement prevents inferior, but sufficiently effective and safe, competition from entering the market. Inferior competition could help to lower the price of the drug overall, which would benefit low-income users of the drugs.
If the FDA regulated food like it regulated drugs, McDonald’s would have to prove that its hamburgers are more effective at satiating hunger than the hamburgers offered by an expensive four-star restaurant in order to be marketed. Those who could not afford the more expensive burger would be out of luck.
It would be unfair to claim that the FDA requirements block all competition from the market. Generics are allowed to enter the market if their producers can prove that they are equal in composition, safety, and efficacy to their name-brand counterparts. But it can be very difficult for generic drug companies to get their drugs through the approval process. In fact, the FDA recently and unexpectedly rejected a generic version of the EpiPen.
Mylan announced that they are planning to release a generic version of the EpiPen at half the cost of the brand-name version. However, this generic is not likely to have a significant positive effect. Even at half the brand-name price, the product remains expensive for most people. Additionally, many doctors and pharmacists may not know or be able to substitute the generic version, reducing the helpfulness of the generic in the short-term, and leaving Mylan with higher revenue than otherwise.
A free market cannot be blamed for this kind of anticompetitive behavior. Big drug companies can reap the private benefits of these regulations by lobbying the FDA to block generics or other competition from entering the market. Only government regulations, which can be captured and exploited by politically powerful corporations, can prevent competition from benefiting consumers.
Without competition, big pharmaceutical companies are able to control the price of their drugs without market pressure. Companies like Mylan can unexpectedly, and perhaps arbitrarily, increase the prices of their products, often beyond what low-income users of the drugs are able to afford. These companies benefit at the expense of their customers.
Insurance makes the situation even more complicated. Those who can afford medical insurance can gain access to the EpiPen for a relatively small copay, so they do not feel the full harm of the price increase. But those who do not have insurance are forced to pay the full price, which is now over $600. Low-income users of the EpiPen are disproportionately impacted by the increase.
If inferior but effective competition was permitted to enter the market, low-income Americans would not be forced into a decision to spend all their disposable income on the drug or simply go without it. The FDA must consider amending their efficacy requirements. Thousands, and probably millions, of lives are at stake.