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 »

Will much change in Antitrust post Brexit?

July 8, 2016

(by Andreas Stephan) The UK’s decision to leave the European Union has come as a shock to markets, politicians and indeed to many ‘Brexiteers’. Although protests demanding a reversal of the outcome and legal wrangling over Art 50  (the process for leaving the EU) continue, mainstream politicians have almost universally accepted the result (the obvious exception being in Scotland) and there is little evidence of public perceptions having shifted towards ‘Remain’ since the vote, despite accusations of a dishonest and misleading campaign by the ‘Leave’ camp. It is therefore almost certain that the UK will cease to be a full member of the EU. Bruce Lyons wrote about the (limited) advantages and (greater) disadvantages of Brexit for competition policy in an earlier blog, but here I suggest that much may remain the same regardless of what the UK’s new relationship with the EU ends up being. Read the rest of this entry »

Drug prices post-Brexit – an expensive pill to swallow?

June 15, 2016

(by Farasat Bokhari) Much has already been written about the potential effects of Brexit on both the British economy as well as the rest of the word, vis-à-vis effects on immigration, employment, wages, inflation, investment, growth and so forth, and by now we know that either the sky is going to fall or it will be like manna falling from the sky.  Definitely one of those two.  Reality however is a bit more nuanced, and what follows may be sector specific and depend on the regulations and terms that are negotiated upon exit.  Post exit, will the UK be on its own in terms of trade agreements with the rest of the world, or will it, like Norway, be able to enjoy benefits of a single market by entering into European Economic Area (EEA)? Not to be gauche, how does it affect the price of my medicines here in the UK?   While the Farage v. Cameron debate rages on, in this blog I give example from just one sector – pharmaceuticals – to discuss how prices of branded drugs, which include new and important therapies, may increase due to various trade agreements post Brexit. Read the rest of this entry »

Should markets be regulated in Brussels or London? Brexit and competition policy

May 26, 2016

(by Bruce Lyons) Much of the UK referendum debate jumps in on headline details about specific ‘regulatory burdens’ without thinking carefully about how to compare membership of the EU against life outside the single market.  In this post, I set out a framework for thinking about the economic advantages and disadvantages of having regulation harmonised across the EU (and possibly implemented centrally in Brussels), as compared with an independent UK-specific regulation (for implementation in London or the devolved nations).[1]  Read the rest of this entry »

Mergers and the Public Interest: the hardest nut to crack for CMA’s new Chief Executive?

May 24, 2016

(by David Reader) After two years at its helm, the Chief Executive of the UK’s Competition & Markets Authority (CMA), Alex Chisholm, is stepping down to become the new Permanent Secretary at the Department for Energy and Climate Change (DECC). His departure marks the end of an era for the competition watchdog which, despite only becoming fully operational in April 2014, has reached a number of key milestones during his tenure. In a recent speech reflecting on the CMA’s achievements over the last two years, Chisholm made reference to notable progress on enforcement activity, efficient merger control and, of course, some very high-profile market inquiries.[1] His verdict, then, is that there is cause for optimism as the authority embarks on a new chapter. But the outgoing CEO is also mindful of ‘the 3 big challenges’ that lay ahead for his successor.  Perhaps the most striking of these ‘harder nuts to crack’, as Chisholm puts it, is the CMA’s ability to deal with ‘challenges to the primacy of competition analysis when sensitive mergers give rise to calls for public interest interventions’.[2] Read the rest of this entry »