• Efficiency—inefficient operators are out-competed
• Variety—if there's money to be made filling a niche someone will try to make that money
• Innovation—you can't improve your competitive position without improving product, price, or delivery
• Accountability—when a business treats you poorly you can take your trade elsewhere

• Efficiency—inefficient operators are out-competed
• Variety—if there's money to be made filling a niche someone will try to make that money
• Innovation—you can't improve your competitive position without improving product, price, or delivery
• Accountability—when a business treats you poorly you can take your trade elsewhere

• Efficiency—inefficient operators are out-competed
• Variety—if there's money to be made filling a niche someone will try to make that money
• Innovation—you can't improve your competitive position without improving product, price, or delivery
• Accountability—when a business treats you poorly you can take your trade elsewhere

Don’t Blame Capitalism for Your Pricey EpiPen

In South Park: Bigger, Longer, and Uncut, offensive television characters Terrance and Phillip inspire moral indignation within a small Colorado town, sparking a movement of outraged parents who actively organize to censor the actors. Rather than focusing their energy on the individuals in question, the parents launch into an over-the-top campaign (complete with song and dance) targeting the entire country of Canada, where Terrance and Phillip live. Their crusade to “Blame Canada” drives the plotline to equally comedic and ridiculous lengths.

We have a similar short fuse in the United States. Though we don’t launch into full-scale invasions of our quiet northerly neighbors (at least, not yet), many Americans tend to miss the mark when attributing blame for our largest problems and woes. This propensity of impugning ideological strawmen usually places capitalism in the crosshairs of America’s most outraged.

On This Episode of “Blame Capitalism”: The EpiPen

One doesn’t have to look far from today’s headlines to see this pattern. The latest controversy: the price of the EpiPen – Mylan’s famous medical auto-injector that delivers an immediate and measured dose of epinephrine – recently skyrocketed 400%, causing an uproar amongst 3.6 million people who depend upon the prescribed product. For those who live in fear of anaphylactic shock, the cost of living quite literally went up.

But surely a new business will take advantage of this public relations debacle, enter the market, and offer a more affordable option, right?

From the time this bill was introduced to the date it was signed by Obama, Mylan’s stock was up nearly 20%.

Unfortunately – and as no surprise to libertarians and free market advocates – federal regulators continue to buffer the padding that surrounds Mylan’s monopoly. Shortly after the Auvi-Q recall, Teva Pharmaceutical Industries pitched a generic version of the EpiPen. However, the Food and Drug Administration (FDA) squashed their efforts, citing “major deficiencies” in their application. Teva plans to appeal the decision, but won’t be able to effectively move forward until 2017 at the earliest.

Teva isn’t alone in this struggle. Windgap Medical, a Boston startup, and Adamis, a small biotech firm based in San Diego, have both struggled to bypass FDA’s barriers of entry in the marketplace as well.

If you need further convincing that the FDA impedes the market, consider the following:

• The average time it takes for a drug to go from the lab to the medicine cabinet is 12 years
• Only 1 in 5,000 new drugs will make it through the FDA approval
• Based on the regulatory burden of creating new medicine, the average price tag for research and development for a new compound is $2.6 billion

So, no, Bernie – it isn’t always just a “few dollars” to produce a pharmaceutical product. The price tag of producing that “first pill” is often steep.

An Unironic “Thanks Obama”

Those companies who “paid to play” are providing a textbook example of crony capitalism, not free market capitalism.

Mylan’s monopoly was also bolstered by the White House. In 2013, President Obama signed into law the School Access to Emergency Epinephrine Act. The program incentivizes the school system to stockpile EpiPens by dangling the carrot of federal grant monies in front of financially beleaguered school districts. From the time this bill was introduced to the date it was signed by Obama, Mylan’s stock was up nearly 20%.

But this little piece of legislation pales in comparison to the benefit doled out by the Affordable Care Act. Following Obamacare’s codification, net spending on prescription drugs increased nearly 20%. Meanwhile, the pharmaceutical industry experienced a renaissance era of whirlwind profits: estimates of profits over the next decade range from $10 billion to $35 billion – a hefty door prize for the industry lobbyists who crafted the ACA legislation.

The EpiPen is not a microcosm; the cost of other prescription drugs are also on the rise. A House of Representatives report found that ten different drugs experienced even larger price hikes, starting as low as 420% and as high as 8,000%.

Considering the scope of government intervention in this specific marketplace, rather than blaming the free market for this controversy, a more appropriate response would be “what free market?” And now, lawmakers are ironically “demanding answers” from Mylan. If forced to speak in front of a Congressional panel and asked what inspired this price hike, Bresch and company should be encouraged to hold up a mirror to lawmakers’ faces.

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