Mylan may have maintained monopoly in schools through anticompetitive contracts in violation of antitrust law
[WASHINGTON, DC] – U.S. Senators Richard Blumenthal (D-CT) and Amy Klobuchar (D-MN) called on the Federal Trade Commission (FTC) to investigate whether Mylan violated antitrust laws to protect its EpiPen product from competition. Today, the Senators urged the FTC to issue a civil investigative demand – an administrative subpoena – to Mylan “to determine whether the company deliberately engaged in exclusionary practices to hinder its competitors and maintain its monopoly position in the market.” Last month, Klobuchar, the Ranking Member of the Antitrust Subcommittee of the Senate Judiciary Committee, called for the FTC to investigate Mylan Pharmaceuticals for possible antitrust violation.
As the cost of EpiPens skyrocketed, schools seeking relief turned to Mylan’s “EpiPen4Schools” program, which offered a significant discount for the lifesaving drug. Some of these schools were required to sign a contract agreeing not to purchase any products from Mylan’s competitors for a period of twelve months – conduct that can violate the antitrust laws when taken by a monopolist.
In today’s letter to the FTC, Blumenthal and Klobuchar wrote that, “further investigation is required to determine exactly what the effect of this restriction was…but, given EpiPen’s dominance and the dramatic price increases, these questions require fact finding and legal analysis, and not theoretical constructs…The FTC must investigate whether Mylan has maintained its monopoly position through the use of these exclusive supply contracts, enabling the company to engage in price gouging for EpiPens by blocking rivals from becoming effective competitors.”
Last month, Blumenthal demanded that Mylan lower the price of the EpiPens to an affordable, accessible level. He also joined Connecticut mothers, nurses and doctors to call on Mylan to end the unconscionable price gouging that is threatening to put the life-saving product out of reach for families, schools and first responders.
Klobuchar has also called for the Senate Judiciary Committee to hold a hearing to investigate the enormous increase in the price of EpiPens.
Blumenthal and Klobuchar joined U.S. Senators Chuck Grassley (R-IA), Patrick Leahy (D-VT), and Ron Johnson (R-WI) in asking the Food and Drug Administration (FDA) to answer questions about its approval process and other steps for alternatives to the EpiPen.
Blumenthal, Klobuchar, and Grassley also called on the Centers for Medicare & Medicaid Services (CMS) to provide information on the effect of Mylan’s price increases on the government’s prescription drug costs. The alarming price increase of Mylan Pharmaceutical’s EpiPen not only harms consumers who face high out of pocket costs, it also has increased the costs to the federal government through Medicare Part D, Medicaid, and the Children’s Health Insurance Program. Following the efforts from the senators, CMS found that Mylan had misclassified the EpiPen as a “Non-Innovator Multiple Source Drug,” or generic drug, resulting in overpayment for the drug by states and the federal government through the Medicaid Drug Rebate Program.
The full text of today’s letter is available below.
September 6, 2016
The Honorable Edith Ramirez
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
Dear Chairwoman Ramirez:
We write to bring your attention a document seeming to confirm press reports that Mylan required schools participating in its “EpiPen4Schools” discount program to sign exclusive contracts stipulating the schools would “not in the next twelve (12) months purchase any products that are competitive to EpiPen(R) Auto-Injectors.” We believe this kind of exclusionary conduct may violate Section 5 of the FTC Act, which bans unfair methods of competition, or Section 2 of the Sherman Act, which prohibits attempts to acquire or maintain a monopoly. And, we write to urge the Federal Trade Commission (FTC) to issue a civil investigative demand (CID) to Mylan Pharmaceuticals to determine whether the company deliberately engaged in exclusionary practices to hinder its competitors and maintain its monopoly position in the market for EpiPen Auto-Injectors (EpiPens).
At least eleven states – including Connecticut – have passed laws requiring schools to keep epinephrine and others like Minnesota have passed laws to allow school to stock epinephfrine, to have on hand for students who may experience anaphylaxis. Against this backdrop, Mylan has raised the price for its EpiPens by 480 percent since 2009 – without any significant improvement to the medication. The EpiPen releases a dose of epinephrine that costs approximately $1 on its own, yet Mylan’s current list price for the product is over $600. Facing public outcry, Mylan has taken steps to make its product more affordable, including expanding its patient assistance program, increasing the maximum “discount coupon” available to certain customers from $100 to $300, and announcing its intentions to release an authorized generic of the EpiPen that will be available for $300. These changes do not relieve the obligation to determine whether Mylan has violated the law.
In 2012, Mylan initiated the “EpiPen4Schools” program to provide discounts and relief to schools from the skyrocketing costs of EpiPens. The program has since grown to include an estimated sixty-five thousand schools. According to the attached company document, the price of an EpiPen through this program in 2015 was $112.10 – more than a $350 discount off the list price at that time. However, in order to qualify for this very significant reduction, schools had to sign a contract agreeing not to purchase any products from Mylan’s competitors for a period of twelve months. Providing discounts on the condition that the customer not purchase a competitor’s goods is the kind of conduct that can violate the antitrust laws when taken by a monopolist, and in Mylan’s case, this may be a direct violation of Section 5. In the past, enforcement actions have been initiated, at least in part, in response to conditional discounts similar to those offered to schools by Mylan.
The FTC recently issued a Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act. In this statement, the Commission provides a concise framework for how the agency will use its expert discretion in challenging behavior that violates Section 5. Employing strategies to coerce or induce schools into exclusive dealings by providing large discounts from monopoly prices harms consumer welfare and the competitive process when it stifles competition and protects a monopoly, and Mylan has provided no cognizable business justification to date. Moreover, several courts have sustained challenges to exclusive arrangements in recent years under Section 2 of the Sherman Act, after the presence of monopoly power was established.
We acknowledge that further investigation is required to determine exactly what the effect of this restriction was and other issues, such as potential justifications, relevant to legality of Mylan’s actions. But, given EpiPen’s dominance and the dramatic price increases, these questions require fact finding and legal analysis, and not theoretical constructs. Consistent with Senator Klobuchar’s August 22 letter, we ask that a formal inquiry be commenced immediately. The FTC must investigate whether Mylan has maintained its monopoly position through the use of these exclusive supply contracts, enabling the company to engage in price gouging for EpiPens by blocking rivals from becoming effective competitors.