Social Responsibility of Business in an Age of Inequality

Mylan N. V is a pharmaceutical company that is the only producer of safe FDA approved auto-inject Epinephrine pens (EpiPens) in the nation. From 2009 to 2016, the price for two of their EpiPens increased from a little over $100 dollars to over $600 dollars and the price continues to stay slightly over $600 dollars today. As a monopoly without any federal regulation, and with a product that over 3. 6 million individuals rely on, Mylan could increase its price any amount it sees fit and still have thousands buy their product.

Mylan is acting socially irresponsible and frankly inhumane by taking advantage of this fact and participating in an obvious case of price gouging. Those with lower economic standings are now forced to choose between sacrificing a significant amount of their earnings or risk the chance of having an allergic reaction that could end their life. It is an individual’s right, no matter their economic standing, to be provided easy access to products that could potentially save their lives. No individual, let alone corporation, has the right to consciously alter someone’s chance at living. Mylan and MonopolyMylan is taking advantage of its monopolistic market position and exploiting its customers through price gouging. Looking through the history of Mylan and its competitors, the company has never had more than one significant competitor in the U. S in its lifetime. A competitor known as Sanofi emerged in the late 2000s and there was hope that the competition would act as preventative measures for future hikes in price. When Sanofi was forced to withdraw their product by the FDA in 2012, Mylan, counterintuitively to usual market behavior, significantly increased its prices. Sanofi in later years came out with another EpiPen-like product called “Auvi-Q” to compete with Mylan, and this was also recalled in October 2015.

Teva Pharmaceuticals in recent years has been involved in producing a prototype but continues to be delayed by the FDA. A current competitor is a company known as Adrenaclick. This corporation offers a significantly cheaper pen sold for $142 at select Walmart locations. However, the product is “rarely recommended by major medical societies as its two caps that must be removed (contrasted with EpiPen’s one) are viewed as inconvenient”. Adrenaclick has also been selling $10 dollar syringes at some CVS locations but these are also discouraged by medical professionals due to the possible complications of the injection not being administered by trained professionals. As is quite obvious, the barriers to entry in this market are extremely high. The company and its team have recognized this, and the fact that the need for EpiPens is so dire that they could exploit this need and turn a larger profit through increased prices. When there is only one producer of a safe product that could save your son’s, daughter’s, brother’s, sister’s, husband’s, wife’s, friend’s, or your own life, you are going to go to extreme lengths for it. Vialet De Montbel is one example of an individual that heavily relies on Mylan EpiPens. She buys them to protect her son who is so severely allergic to milk; so much so that he needs to wear a mask in public. For two packs of two EpiPens she paid a hefty price of $1,212 dollars which she claimed to be a steeper price than her mortgage.

This type of spending for her, and for most, is not sustainable. There is no argument against the idea that this is a definite case of price gouging. Mylan has tried to fight such allegations by adding on a generic version of the product which is half the price. This option is still three times more expensive than the original product’s price in 2009 and is still a steep price. Mylan has technically not broken any laws, and they still allegedly provide free EpiPens to schools. However, there are still millions of individuals relying on the immediate use of EpiPens. Economist John Maynard Keynes has said that “. . . even if these price hikes are only in the short run, some of these patients may be dead in the short run, too. . . ”. Is the Future Looking Bright?

No matter the backlash they recieve, its seems that Mylan’s team will continue to unethically exploit their customers as long as they remain in their current position. Mylan has no incentives to act socially responsible because they are not competing against anyone and there haven't been significant consequences for their actions. This is where there needs to be a call for action. No company should have the right to sacrifice possible lives in order to make a larger profit. Federations need to begin to regulate monopolistic companies in ways that forbid them from raising prices to astronomical amounts. Mylan’s product in most cases is the first attack against an allergic reaction and depending on the severity of the allergy, they are the first and the last. Some individuals have such extreme allergies that they need a shot administered to them within a minute of an allergy attack. If they cannot afford Mylan’s product, there is a sliver of a chance of their survival. One alteration that could be put in place is a limit on their profit margins. Another option would be to offer significantly higher discounts to underprivileged individuals in need of the product. They could also cap the price in general, offer one free pen per family, offer free pens to those in lower economical standings with extremely severe allergies, or provide measures to lower the barriers to market entry. One final idea would be to increase funding for the FDA. The FDA is seriously underfunded which is part of the reasons for such high barriers to entry in this specific market, and other pharmaceutical markets. If more competitors were to enter the market, the competition would theoretically lower prices to something much more reasonable. There are many routes that the government could take to ease the pressure off of those in need of EpiPens. There needs to be some repercussions for these price hikes as many pharmaceutical companies are using Mylan as inspiration to hike prices for their products as well.

Mylan’s price hikes produced both positive and negative effects for the company, and overall have not had as many negative financial effects as one might expect. Mylan’s price increase was highlighted during August of 2016 and in September of the same year there was an investigation into EpiPen pricing done by the U. S. Subcommittee on Healthcare, Benefits, and Administrative Rules. The hearing took place on September 21st of 2016 and Mylan’s CEO Heather Bresch testified against their significant price hikes. Mylan “. . . agreed to pay $465 million to settle Department of Justice allegations that it falsely classified EpiPen to overcharge Medicaid”. Yet the company claimed it did nothing wrong. In the two weeks following the hearing, between September 22, 2016 and October 7th, 2016, Mylan’s stock dropped from a value of $42. 59 to $35. 94. Today the stock is worth $36. 60 and continues to maintain a price which is considerably lower on average than previous years. In 2015, “Mylan reported a net profit margin of 8. 9%, but some speculate the margin for the EpiPen was closer to 55%” which supports the price hikes as being unethical and simply due to corporate greed. A company making a possible net profit margin of 55% could afford to give up some of that money to make the product more accessible. Mylan has “. . improved its margins and ultimately driven higher returns and shareholder value. . ” which have all been positive effects of the price hikes. However, the company’s market cap plummeted by $3 billion and their stock dropped over 12% in 5 days. A larger matter is that no one entirely knows how much of a profit Mylan makes off of EpiPens sales and probably never will. It is projected by some experts that they make a profit of $30 dollars off of each pen, Mylan claims it makes $50, and other experts argue it's closer to $80. The problem with all of these claims is that Mylan says that they spend approximately $75 to produce and distribute EpiPens and invest $175 dollars back into the company through research & development or other mediums; which leaves them a total of $50 dollars of pure profit. There are no reports to support these claims. The entire system is very vague and Mylan has had numerous requests from the Subcommittee on Healthcare, Benefits, and Administrative Rules for detailed information of their costs and profits which Mylan has yet to provide. Looking at Mylan today, they don't seem to be suffering financially with a market cap just over $18 billion and healthy revenues and profits that are well into the billions. However, their current trailing P/E ratio is 42. 21 and their forward P/E ratio value of 6. 98. The trailing indicates that the stock is possibly overpriced, the company does not make much money off of it, or it has been expecting growth in the future. The forward P/E could indicate a possible lack of growth in the future or that the company is undervalued. Overall, their stock price has on average decreased, they experienced a lot of backlash, and have had a few setbacks in their stock. They have seen a number of negative and positive repercussions directly following their price hikes, but don’t seem to be currently suffering financially. One could associate this with the fact that their monopolistic position and demand for the product forces customers to continue to make purchases. What I Would Have Done Differently.

There are hundreds of different routes Mylan could have and still could take in order to continue to turn a good profit yet act socially responsible. That in fact would be my first concern as Mylan CEO; to consider options that are socially responsible. I would first look into different options of lowering production costs of the product. Many drug manufacturers currently claims that their high prices are justified due to research and development costs being extremely high. Yet the fact of the matter is that most of these companies spend more on marketing than research. Mylan reported having $390. 2 million in total cash and 2. 1 billion dollars in operating cash flow in their annual statement which indicates they have ample amounts of funds. As CEO of Mylan I would spend more money into developing a cheaper option that is easily affordable for customers. This act in itself would be marketing for the company as it would restore relationships with Mylan’s customers and emphasize a focus on our care for customers. Overall, I am an individual with a conscience and I would take any measures I could to make sure that my corporation was bettering society, not acting as the possible reason for deaths.

Mylan and many other pharmaceutical companies are realizing the power they have over customers in their markets and choosing to exploit their needs for the product by price gouging. They are changing the meaning of capitalism as they are changing it from being a free market to a largely dominated and exploited one. These monopolistic corporations are not regulated or prosecuted for unethical decisions and thus change these values of capitalism to support their negative practices. In the coming years, I believe that there needs to be consequences for these corporations, or measures taken to prevent this phenomenon from happening in countless other markets. Mylan has decreased individuals’ ability to buy their product, reduced individuals’ chances for survival in allergic reactions, and withheld any concrete information on their profits. They have acted socially irresponsible and in order to reduce costs and save lives, something has to be done right here, right now.