Featured case: Pricing the EpiPen: This is Going to Sting

Share this page:
The case

Who – the protagonists

Heather Bresch, CEO of Mylan Inc.

What?

An EpiPen is a medical device used to automatically inject a measured dose of adrenaline through a spring-loaded needle. It is commonly used to treat anaphylaxis, a potentially life-threatening allergic reaction triggered by, for example, nuts and shellfish, bee stings, latex, or pharmaceutical drugs.

Why?

Over five years, Mylan increased the price of the EpiPen by more than three and a half times. But adrenaline had been in use for decades and cost less than $1 a dose to produce. Manufacturing costs for the EpiPen were also thought to be less than $1. Prices for the same product in France and Canada, for example, were much lower. The company was receiving a lot of negative publicity and several US senators had asked the company to justify its pricing policy.

When?

Mylan acquired the EpiPen line of products from Merck in 2007. By that time, they had been available in the US market from more than 25 years. By 2016, Heather Bresch was facing damaging media coverage and government scrutiny.

Mylan's Headquarters

Where?

Mylan’s global headquarters are in Canonsburg, Pennsylvania, US.

Key quote

‘Another reason to hate Mylan, which jacked up the price of life-saving EpiPens: it’s a tax dodger.’ – Headline in the Los Angeles Times, 2016.

What next?

Mylan’s CEO had a lot to consider in a short time. Congress was asking some tough questions and she was facing a growing media firestorm. And the price of Mylan shares had decreased by 10% in a week. Her next steps could drastically affect her career and the company. What should she do?

 
Interested in finding out more?
Download

Download the case and teaching note

Educators can login to view a free educator preview copy of this case.

Ref UVA-M-0915
Ref UVA-M-0915TN
The author

Thomas J Steenburgh

Thomas explains the pros and cons of writing from public sources and the importance of nuanced discussion in the classroom.

Public sources

The main con of writing a case from public sources is that you don't have access to any internal information from the company. With a case like EpiPen, however, the company is unlikely to share anything useful. The main benefit of writing a public source case is that the company has no say over what you write. This independence is helpful when dealing with sticky situations involving people or ethical dilemmas. I don't think the EpiPen case could have been written in any other way.

periodic table

Nuanced issues

All interesting issues are multifaceted and the cost of healthcare products is an emotional and ethical issue as well as a practical one. My goal is to get my students to explore the full range of the topic and not let their emotions overwhelm the discussion. This usually means letting the very passionate students speak early in the discussion. They can't listen until they speak. But then the class is open to different points of view and it is possible to proceed to more nuanced issues.

In the EpiPen case, people need to understand that the practice of price discrimination can allow greater access to pharmaceutical drugs for people who cannot pay for them. They also need to consider how today's profits might lead to new innovations in the industry. After you get past the price gouging discussion, there are many more nuanced and interesting issues to explore.

Pricing fairness

There is a broad lesson to be learned from this case about fairness in pricing. Profits are created on a bed of sand if a company does not create meaningful value for consumers and set price at a reasonable level.

It's not believable that the price of an EpiPen should rise 600% when there's really no new innovation in the product. This is why Mylan is facing lawsuits from many different stakeholders - customers, shareholders, and the government.

Deciding on priorities

This is a terrific case for having people prioritise their plan of action. Many decisions need to be made quickly, so the context forces students to choose what to deal with first. 

Different audiences

This case is suitable for many different audiences. If taught with MBA students, most of the discussion will focus on the pricing issues discussed above. They may touch on crisis management, but don't have in-depth experience on the topic. If taught with more senior executives, however, you can delve into crisis management issues in a more complex manner. Senior executives can also contemplate the motivations of the many different stakeholders in a more nuanced way.

About the author

Thomas J Steenburgh is the Paul M. Hammaker Professor of Business Administration at Darden School of Business
e SteenburghT@darden.virginia.edu

 

View a full list of featured cases