Questions about access, costs surround Mylan generic EpiPen

Following weeks of criticism over dramatic price increases on its EpiPen, Mylan said Monday it will offer a generic version of the life-saving allergy treatment. The generic, which the company says will be identical to the brand product, will sell for $300 for a two-pack, which is half the cost of Mylan's brand name EpiPens. The news did little to dim the ongoing outcry over the price, for which there are no other competitors on the market. Some called it a marketing ploy, while Robert Weissman, president of the consumer group Public Citizen, said the generic price was still too high, writing in the Huffington Post of "the weirdness of a drug company offering a generic version" of its own brand-name product.

KHN offers answers to some key questions related to Mylan's generic and breaks down what this development could mean for consumers and the marketplace.

[Also: Mylan announces half-price generic alternative to EpiPen]

When will I be able to get a generic EpiPen?

Mylan, which is the company that markets this treatment, says it will have a product out within a few weeks. Pfizer is the firm that actually manufactures EpiPens. The drug used is the product epinephrine but the patent applies to the auto-injector device used to deliver it.

Will it cost me less?

For some patients, yes. Those who are uninsured, pay a percentage of the drug cost as their insurance copayment or have an unmet prescription deductible will likely pay less for the $300 two-pack generic than for the brand-name version. That's because what they pay is based on the full price. Many other consumer have insurance with flat-dollar drug copayments, ranging from $10 to $100 for every prescription so they are paying far less than the retail price. Insurers generally set lower copayments for generic drugs than brand. So if a consumer's health insurer makes the generic available and places it in the generic payment "tier," the cost per prescription also could fall. In some cases, however, there is a possibility that some people who could benefit from the lower cost generic won't have access to it. An insurer or pharmacy benefit manager, for example, might not add the generic EpiPen to the formulary, or restrict its availability in some way. That's because some health plans get such large rebates from brand-name companies as to make the brand-name version cost less than the generic, said Adam Fein, president of Pembroke Consulting. But consumers do not benefit from rebates directly. Instead, it goes to the pharmacy manager, insurer or employer.

[Also: EMS crews in New York State drop EpiPen in lieu of lower-cost option]

Are manufacturer rebates good?

It depends. They can help lower the cost of the drug for insurers and employers, helping slow overall spending and keep costs paid by consumers such as premiums and deductibles lower. "If we didn't have rebates [spending on drugs] would be at least 35 percent higher," said Richard Evans, co-founder of SSR Health, who does investment research on the pharmaceutical industry.

Even so, some say rebates should be barred in favor of more transparent prices. Stephen Schondelmeyer, director of the Prime Institute, an independent consulting group that monitors pharmaceutical trends, said discounts don't make him feel good when his health plan is paying about $700 for EpiPens that it paid $80 for five years ago. "We should outlaw rebates," said Schondelmeyer, who also helps oversee the University of Minnesota's health plan. "What rebates are really is a way to overcharge the market. … We are giving the drug industry loans to the tune of billions of dollars … and rarely does it get back to the end consumer."

[Also: Mylan offers EpiPen coupon after public backlash over price hike]

Are drugmakers even allowed to create generic versions of their own products?

Many major drugmakers also market their drugs as generics. Called "authorized generics," such products are identical to the drugs approved by the Food and Drug Administration as part of a manufacturer's New Drug Application. Drugmakers do not need to go back to the FDA for any further approvals in order to market an authorized generic.

Why would drugmakers want to offer a generic to their own product?

Most authorized generics appear on the market just as a competitor launches a generic of its own. In those cases, the move helps brand manufacturers retain some revenue that might otherwise be lost to competitors because the entry of less costly generics generally results in a sharp drop in brand-name sales. Manufacturers are careful not to release the authorized generic much before it loses patent protection, because it doesn't want it to undercut sales of its more pricey brand-name product.

So why is Mylan doing this?

Mylan appears to be offering its "authorized generic" in response to complaints about the cost of its brand-name drug, not fear of competition from rivals. It currently controls the market. Pembroke's Fein said Mylan miscalculated when it raised EpiPen's price tag from about $100 to $600 over the past decade.

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During that time, the firm failed to notice that insurance coverage had changed, Fein said. Instead of flat-dollar copayments, a growing number of consumers now have prescription deductibles they must meet first. That means some consumers are on the hook for the full $600. "They behaved as if everyone had good insurance," said Fein. And the firm still seems to argue that raising its prices would not hurt most consumers, noting that many had flat copayments of less than $100. But, as the price rose, their insurer or the employer who provides coverage made up the difference, helping fuel premium and deductible increases.

"Premiums are an out-of-pocket cost," said Schondelmeyer. "That's what Mylan and other manufacturers have ignored."

Do authorized generics reduce competition, which is supposed help lower prices?

Some generic companies argue that is the case, saying a brand-name company jumping in ahead of rivals makes it less attractive for generic makers to bring their own products to market or challenge existing patents held by brand-name companies. But a 2011 Federal Trade Commission report found that authorized generics did not "measurably" reduce the number of patent challenges. The study also said the presence of authorized generics actually resulted in retail generic prices that were 4 to 8 percent lower than they would have been without.

KHN's coverage of prescription drug development, costs and pricing is supported in part by the Laura and John Arnold Foundation.

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