What Would You Do?

Mylan Headquarters, Canonsburg, Pennsylvania

It’s 2012 and Mylan, the company behind the EpiPenAuto-Injector, is in the middle of a lawsuit. To settle, they agreeto allow a generic competitor into the market in 2015, knowing thiswill cut into a big part of their business when the time comes.EpiPen is an epinephrine auto-injector used to treat emergencyallergy reactions. EpiPen has been on the market since the 1980sbut remains under patent because of the device, particularly thesafety cap for the needle, not the active ingredient, epinephrine.Epinephrine is a hormone made by the body known as adrenaline andwas first isolated more than 100 years ago. In the years leading upthe 2012, Mylan had already been increasing the prices of EpiPensteadily. In 2007, the cost was around $100 for an EpiPen two pack;by 2011, $165. After the settlement, Mylan used a common practicein big pharmaceutical companies of sharply increasing the price ofa medication in the years before a generic becomes available. It isa final attempt to make big profits off the brand-name drug beforelosing business to the generic. Drug manufacturers justify the highprices saying they cover the cost of years of research anddevelopment that went into creating the drug originally. Now it’s2016, and Mylan is charging around $600 for an EpiPen two-pack.However, Teva, the expected generic, was rejected by the Food andDrug Administration, and Auvi-Q, EpiPen’s nongeneric competition,was pulled from the marked due to dosing problems. EpiPen now has amonopoly on the market for this lifesaving drug, and people areoutraged by the price. With no alternatives available, customersand politicians alike are demanding answers and change. SenatorChuck Grassley (R-Iowa) wrote in a letter to Mylan CEO HeatherBresch, “I am concerned that the substantial price increase couldlimit access to a much needed medication.” Democratic presidentialnominee, Hillary Clinton’s campaign spokesman Tyrone Gayle calledfor price cuts saying, “Since there is no apparent justificationfor the price increase, Mylan should immediately lower the overallprice of EpiPens.” People suffering from life-threatening allergieswon’t be the only ones affected by the price increase. Publicschools and government institutions are among EpiPen customersbecause the medication is used for emergency treatment of allergicreactions. Bresch said she is as frustrated by the price increaseas customers, saying “everyone should be frustrated.” She said theprice reflects a system where intermediaries such as wholesalers,retailers, and pharmacies all add to the ultimate list price of themedication. The system also requires customers to pay insurancepremiums and out-of-pocket costs for prescriptions medications.“The patient is paying twice,” Bresch said. “They’re paying fullretail price at the counter, and they’re paying higher premiums ontheir insurance. It was never intended that a consumer, that thepatients would be paying list price, never. The system wasn’t builtfor that.” In response to backlash from the high prices, Mylanannounced plans to expand its co-pay assistance programs, doubleeligibility for its patient assistance program to 400% of thefederal poverty level, continue to offer the EpiPen4Schoolsprogram, and open pathways so patients can order EpiPen directlyfrom the company, thereby reducing the cost. EpiPen4Schools waslaunched in 2012 and has provided more than 700,000 free EpiPens tomore than 65,000 schools nationwide. Representative Elijah Cummings(D-Maryland) was not impressed by Mylan’s announcement. “Offering ameager discount only after widespread bipartisan criticism isexactly the same tactic used by drug companies across the industryto distract from their exorbitant price increases,” Cummings said.“Nobody is buying this PR move anymore. Mylan should not offerafter-the-fact discounts only for a select few — it should reverseits massive price increases across the board immediately.” Aftercontinued criticism, Bresch reiterated that price is only part ofthe problem. “All involved must also take steps to helpmeaningfully address the U.S. health care crisis,” she said, “andwe are committed to do our part to drive change in collaborationwith policymakers, payors, patients, and health careprofessionals.”

1. As problems arise and solutions are pondered, who hasthe authority to make the ultimate decision? What is the best chainof command when big pronouncements have to be made? If you were CEOat Mylan, what would you do?
2. The company will have to adapt to survive as morecompetitors enter the market. What benefits would there be to achange in organizational structure or process? Shoulddepartmentalization be considered for Mylan? If so, what type ofdepartmentalization?