Why have Mylan launched a generic EpiPen?

August 30, 2016

(by Farasat Bokhari) In a new development surrounding the controversy of price hikes of Mylan’s lifesaving drug EpiPen, the manufacturer announced that it will introduce a generic version, and sell the new drug at half the price of its branded version. Mylan has increased the price of its EpiPen injections from about $100 in 2009 to over $600 this year and will sell the generic at $300, and has come under scrutiny and strong criticism from public and government officials alike.  Mylan are not alone in increasing drug prices in recent times. For instance, Martin Shkreli increased the price of Daraprim by 5000 percent in 2015. However, that was to do with a hit-and-run opportunity that arose out of its orphan drug status, and the speed with which a rival generic could gain approval to enter the market (see my earlier post, ‘The Economics of a $750 Pill’).

Leaving aside the issue that the generic is still three times more expensive than the original 2009 price, this announcement has left some puzzling over why, or rather how, such a move makes any sense.  To paraphrase the incredulity expressed by Richard Quest of CNN, why would anyone pay $600 for a drug when the exact same product by the same company is also available for $300?  How does Mylan stand to gain anything from this move? Read the rest of this entry »

We need to quantify deterrence when evaluating Competition Authorities: a response to Bruce Lyons’s Blog Post

August 19, 2016

(by Steve Davies) The time has come for us to stop ducking out of the big deterrence issue in competition policy – more precisely, the measurement thereof. This blog has been provoked by Bruce Lyons’s excellent recent blog, in which he argues that the performance target placed on the CMA by government may have serious adverse consequences for the Authority’s incentives to undertake those investigations which generate relatively small measurable direct benefits, but potentially very large, unquantified, deterrent effects. Read the rest of this entry »

The dangerously distorted incentives created by the CMA’s performance target

August 5, 2016

(by Bruce Lyons)[1]  The CMA has recently published its annual report and associated impact assessment.  Its performance management framework commits the CMA “to achieving direct financial benefit to consumers of at least ten times our cost to the taxpayer.” [Annual Report 2015-16, p.66].  Target setting and performance measurement are an important part of performance management.  However, the precise way that the government requires the CMA to justify its funding is dangerously distortionary. Read the rest of this entry »