The ability of Mylan NV to raise EpiPen's list price by nearly 550% over the past eight years underscores the pricing power drug companies enjoy for iconic brands facing little competition.
EpiPen dominates the more than $ 1 billion market to treat life-threatening allergic reactions because of Mylan's effective marketing and lobbying, aggressive defense of its turf and the relatively high costs of manufacturing such sterile injections, analysts say.
A buzz saw of recent criticism about Mylan's pricing tactics is shedding light on its grasp of the market. On Thursday, after politicians, physicians and lawmakers criticized the price of EpiPen, Mylan offered to provide more financial help to patients, saying it would cover out-of-pocket costs up to $ 300, from $ 100 previously. It also said it would expand the number of low-income patients eligible to receive company subsidies.
But the company didn't go so far as to roll back EpiPen's high list price.
Since acquiring the rights to sell EpiPen in late 2007, Mylan has increased the list price of a pack of two by 548%, to $ 608.61. The two most recent price increases, last November and this May, came after Sanofi SA 's competing Auvi-Q was recalled, according to Truven Health Analytics.
The absence of real competition is a factor in Mylan's ability to keep raising the list price of EpiPen, analysts say.
The EpiPen delivers a shot of epinephrine, a synthetic version of adrenaline, which is an old medicine that has long been off patent. Mylan's special ingredient is the hand-held delivery device that allows users to easily inject themselves in an emergency.
Making such sterile injectables is expensive because of the need to keep out contaminants at every step, adding another hurdle for any rival.
The upfront costs on that are "pretty high," said David Lebo, a Temple University professor specializing in pharmaceutical manufacturing.
A few competitors have tried but so far have failed at challenging EpiPen. Auvi-Q was prescribed 353,600 times last year, according to IMS Health, before Sanofi was forced to recall the product because of dosing problems. It is still off the market.
Other brands weren't nearly as successful. They "couldn't get a lot of market share. Doctors just wrote EpiPen on prescriptions," said Ronny Gal, a Sanford C. Bernstein & Co. analyst.
Teva Pharmaceutical Industries Ltd. has sought to sell a generic version. But Mylan has argued that Teva's version endangers patients trained to use the EpiPen, because Teva's isn't an exact copy.
In February, the Food and Drug Administration rejected Teva's application for approval, the company said, without specifying the reasons. "Teva expects that its epinephrine product will be significantly delayed and that any launch will not take place before 2017," the company said.
A Mylan spokeswoman pointed to CEO Heather Bresch's public comments on CNBC Thursday. In the interview, Ms. Bresch sought to shift blame to insurers who set high deductibles and drug-benefit managers who make money by negotiating bigger discounts off increasing list prices.
"The irony is the system incentivizes high prices," she said.
Critics counter that drug companies like Mylan fuel the system by refusing to disclose the discounts they negotiated, and that high prices for treatments like EpiPen force health insurers to raise deductibles for members to make their monthly premiums more affordable.
Wells Fargo Securities analyst David Maris said Mylan's new moves appeared to simply shift the heavy costs of EpiPen. "The price is not dropping. In other words, it appears that some insurance companies and those patients covered by good insurance plans will continue to pay current prices and see no discounts," he wrote in a note to investors.
Rivals haven't always competed with EpiPen by undercutting its price. For a time last year before it was recalled, Auvi-Q listed for roughly the same price as EpiPen, according to Truven's wholesale acquisition cost records.
Impax Laboratories Inc. raised the price of another rival, called Adrenaclick, to about the same level a week before Auvi-Q's recall in late October 2015. Impax "can only manufacture so much product" because plant workers assemble the components by hand, said Mark Donohue, a company spokesman. The company is investing in automating the manufacturing of Adrenaclick, he said, but it will take a few years.
The market's pricing power speaks to Mylan's successful brand building. The company effectively stoked demand for the emergency allergy treatments after acquiring EpiPen rights in late 2007. Mylan launched a marketing campaign that raised awareness of the dangers posed by peanut and other allergies, along with the need to be prepared for severe reactions. The efforts increased demand for emergency treatments, especially among parents whose children have allergies.
With the help of patient groups, the company also lobbied governments to encourage the ready supply of EpiPens in schools and other public places, much like defibrillators.
EpiPen became an iconic brand, like Xerox or Band-Aids. It was prescribed by name by doctors and sought out by parents and patients who liked the pen's ease of use, Sanford C. Bernstein's Mr. Gal says. The threat to Mylan, he said, is that the controversy turns off patients, prompts health plans to find alternatives and prods regulators to approve Teva's generic version.
The patient assistance that Mylan announced Thursday is expected to cost the company. The new subsidies could amount to as much as $ 100 million, or roughly 10% of the product's sales, according to Evercore ISI analyst Umer Raffat.
Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com
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