The pricing of the EpiPen, an auto-injector of epinephrine that can interrupt life-threatening allergic reactions, has come under fire from the U.S. Federal Government in recent days. Several members of Congress, whose family suffer from common allergies and whose lives have been saved by an EpiPen have publicly demanded government investigation into the cost of the drug, as prices have increased 600% in the past seven years. It’s obvious that this presents a health care challenge to patients who need this extremely simple emergency medicine but can’t afford it.
But what does the EpiPen mean to the pharmaceutical companies who develop and market it? In this week’s post, we’ll look specifically at the EpiPen’s influence on the bottom line of Pfizer and Mylan, and hypothesize about what the drug represents to these companies. And we’ll do it simply by looking at their public financial data.
A bottom-line builder.
It’s easy to see that the EpiPen represents the kind of revenue that a company like Pfizer would seek to maintain and grow.
A drilldown into the segments revenue reveals that the EpiPen revenue has grown steadily since 2012. This may be due to increased demand (for example, The School Access to Emergency Epinephrine Act encourages schools to have a supply of the drug on hand), but may also be due (at least in part) to a steady increase in price.
What’s more interesting is the textual analysis of Pfizer’s Q1 2016 Commitments and Contingencies disclosures:
According to these documents, Pfizer is involved in a lawsuit against a division of Novartis to protect its EpiPen patent that expires in 2025. Novartis would like to develop a “next-generation auto-injector” which will challenge Pfizer’s control of this marketplace. It’s clear that EpiPen revenues are important enough to the company to pursue this legal action, even though at 294M, it represents a smaller portion of Pfizer’s overall revenue.
A text search of Mylan Pharmaceuticals’ 2014 MD&A also shows the EpiPen to be quite profitable. Here are some quick quotes:
....“Adjusted Gross Margins were favorably impacted in 2014 as a result of new product introductions by approximately 180 basis points and favorable pricing and volume on the EpiPen® Auto-Injector in our Specialty segment by approximately 45 basis points.”
....“For 2014, Specialty reported third party net sales of $1.19 billion, an increase of $205.5 million, or 20.9%, from $981.7 million in 2013. The increase was principally the result of higher sales of the EpiPen® Auto-Injector, as a result of favorable pricing and increased volume. The EpiPen® Auto-Injector is the number one dispensed epinephrine auto-injector and, in 2014 it became the first Mylan product to reach $1 billion in annual net sales. The market continued to grow as awareness of the risk of anaphylaxis increased. “
Mylan also invests substantially in the marketing and awareness of the EpiPen:
...“SG&A expense for 2014 was $1.63 billion, compared to $1.41 billion for 2013, an increase of $217.2 million. SG&A increased due to increased selling and marketing costs of approximately $52 million, primarily related to the EpiPen® Auto-Injector, which includes our direct-to-consumer marketing campaign.”
It’s easy to see why pharmaceutical companies care so deeply about the future of the EpiPen. And because this simple, inexpensive treatment can mean life or death for kids and families everywhere, it’s also easy to see why its pricing has become so controversial.