Last week, I wrote about how Mylan Pharmaceuticals was so short-sighted with its dramatic increase in the price of epi-pens used to prevent severe allergic reactions especially in children. I said that the executives of Mylan and other drug companies make poor business decisions when they think they can jack up prices and increase profits, apparently unconcerned or unaware of the risks of a public relations backlash. Mylan was overwhelmed by a major social media campaign of parents of children using the epi-pens which cost $600 for a pack of two. By the end of last week, Mylan was saying it was going to produce a generic version for half that price.
This week comes the news that New York State Attorney General Eric Schneiderman has opened an investigation into Mylan because his staff is concerned that Mylan had anti-competitive practices in its business with health providers and consumers. The company, of course, denies that it has had any restrictions in his contracts. It is likely that attorney generals in other states will also begin to investigate the company’s activities in their states. All of this is more bad news and bad public relations for Mylan.
Stockholders in these companies who have benefitted from the great profits need to be very concerned about what is going on in the pharmaceutical industry. The kinds of exorbitant profits with little control or accountability inevitably lead to a consumer backlash which spills into the media and into the public sector and halls of power.
It is time for the drug companies to realize that they need to regulate themselves and balance their profits with the public interest. Even if they can charge whatever they want, they need to realize that there are dangerous longer term risks like what we are seeing in these last two weeks and other cases in the past year of price gouging.