By William Reynolds
Monopolies are often the by-product of market failures that are induced through crony capitalist policies. Crony capitalist policies are pieces of legislation enacted to benefit politicians and private companies at the cost of the consumers. The ramifications of these policies on competitive markets can be far-reaching, and in certain instances have larger costs to the government than the short-sighted benefits.
A case in point is the Epinephrine auto-injector (EpiPen) market controlled by the pharmaceutical giant, Mylan. Mylan bought out one of its competitors, Merck, in 2007 and obtained the technology and patents for the EpiPen. The company’s flagship product, the Mylan EpiPen is the nation’s standard for treatment of anaphylactic shock induced through allergies.
Prices for EpiPens increased over 500 percent in the short time that Mylan has owned the rights for the product. The company’s ability to raise its prices to this extent is due to the near complete lack of market competition. This raises the question of how Mylan was able to gain such a foothold in this market. Extensive research of Mylan lobbying disclosure forms and contribution reports reveals the company gained its power through legislation passed in 2013.
In California, state Senator Bob Huff sponsored a bill requiring elementary and secondary schools to maintain a stockpile of epinephrine injector devices for use in cases of emergency. This law was passed with the help of lobbying efforts by FARE, a subsidiary of the Mylan lobbying group.
Mylan successfully promoted similar legislation at the national level. In 2013, the School Access to Emergency Epinephrine Act was passed by Congress and signed into law by President Barack Obama. A key feature of the federal law incentivized states to participate through the use of Medicaid subsidies and grants. In this time, Mylan gained a substantial marketing-advantage over all other competitors with the support of the U.S. government. In return, Mylan’s lobbying groups contributed to the campaigns of many congressmen and congresswomen like Bob Huff.
The legislation also allowed Mylan sole access to enter into contracts directly with schools for discounted prices. These contracts protected Mylan’s monopoly provider status by inserting a clause stating, “the School hereby certifies that it will not in the next twelve (12) months purchase any products that are competitive products to EpiPen Auto-Injectors.” Legal professionals suggest this language may violate antitrust law, and the NY State Attorney General’s office is set to investigate. Notably, Mylan settled a lawsuit with the U.S. Department of Justice in April 2017 and will be required to repay the government $465 million for Medicaid fraud.
A lesson of the Mylan affair is that citizens must be ever vigilant against private interests using the political process to serve their own narrow interests and bottom line.