Business Society

EpiPen/Mylan Stakeholder Analysis

Introduction:

Large pharmaceutical companies rarely make headlines for actions that stick to the script and follow the public’s expectations. While firms will receive accolades for new discoveries and advances, such headlines act more as a flash in the pan than a sustaining news story. Such companies are noticed more when they enact policies, usually price hikes, that attract negative attention. Whether the companies and their visible leaders are treated with vilification or mere criticism after price hikes is a matter of circumstance, but Mylan and CEO Heather Bresch appear to be trending toward the former after raising the price of their EpiPen to $600 for a two pack. Since medicine as an industry is driven by sick people in need of drugs and often with few options, providers are faced with more scrutiny than those who provide other goods and services. Price increases on drugs are directly criticized as targeting a specific, identifiable group of sick people and the public response is often unforgiving. For example, Martine Shkreli has been portrayed as a public enemy following his decision as Turing Pharmaceuticals CEO to increase the price of a tablet needed by AIDS patients from $13.50 to $750 per pill. Because of the lengthy research and development costs it takes to patent a drug or generic, there is often a lack of competitive options to drugs such as EpiPen or Turing’s Daraprim that are medically crucial to their consumers.

Unlike other goods, the market cannot always provide a competitor to ensure appropriate pricing and that leaves patients vulnerable. Mylan will continue to be pressured by the media and public until the situation of EpiPen pricing is resolved. If the company is content with taking criticism, the EpiPen price may well remain at its current $600/2 pack rate. However, the situation is ethically troubling, and Mylan may be best served reevaluating the move as it affects the future of the company and its other products.

Below is a chart summarizing the discussion further explained in this paper.

Consumers

Stake – Right

Consumers of the EpiPen are critically affected by every decision that is made with the drug. The heart of the entire crisis is centered on the belief that consumers have been abused by Mylan’s decision to raise the price of the EpiPen. As consumers of EpiPen do not currently have a viable alternative, they are faced with two options: either take the $600 per 2 pack price gouging in stride or go without a medical device that is often used to save lives. Additionally, many EpiPen users are children, who clearly should not be exposed. EpiPen consumers are currently purchasing the drug without the option of a non-Mylan alternative, as the recent generic to hit the market is also produced by Mylan. Therefore, until another firm is able to produce a drug and delivery method that rivals EpiPen, consumers have a direct stake in every move that Mylan employs. The drug saves lives and consumers have a right to be treated fairly.

Attributes – Legitimate, Powerful, Urgent

Consumers of EpiPen are clearly a legitimate stakeholder. Their collective need for the drug is crucial and the drug legitimately protects all of its users from the repercussions of allergic reactions. It also goes without saying that without these consumers, Mylan would lose a significant source of revenue. Consumers represent a powerful stakeholder because their voice has brought this crisis to center stage and on a national scale. Consumer voice has pushed this and similar situations to the heart of the news cycle and has revived a conversation that will continue until the situation is resolved. If a competing firm is able to get approval for a similar, safe and effective product, the power of the consumer will fully be on display. However, Mylan’s lack of current competition serves as the sole roadblock to the consumer having a more powerful stake. Currently, consumers can voice and rally, but do not have the option to move their dollars away from Mylan and to a competing firm. Lastly, consumers represent an urgent stakeholder because the need is pressing. EpiPens last roughly a year, so consumer need for a new device will always be current. Consumers have been so vocal because they do not want to be forced to buy an EpiPen before a fairer price point can be reached.

Responsibilities – Economic, Ethical

Mylan has an economic responsibility to consumers to remain profitable enough that the drug will always be accessible. The firm must price the drug appropriately, so a point is never reached where Mylan goes insolvent and the drug is no longer produced. However, making the drug accessible also means that consumers must be able to afford the drug to protect themselves and their children. Mylan has cited product and development improvements as factors that have driven up their costs, but it is more than reasonable to assume that the corresponding price hike is disproportionate to what the increased development costs are. The price hike is also unethical, as the company is aware that consumers depend on the drug and do not have other options. By offering a generic to its own drug, without competing drugs on the market, Mylan indirectly admits that it is aware of its missteps. As consumers may lose their life without the drug, Mylan is ethically responsible for ensuring that it is accessible.

Strategy – Collaborate

This scenario represents a very delicate situation, as Mylan’s monopoly dictates that it can be hated by consumers and the media alike, but still needed and the drug still purchased. For the long term health of the company, Mylan should work to repair its relationship with consumers and the public. To do so, Mylan must create pricing solutions that go beyond subsidies for poorer patients and blaming insurance companies. Doing so will only pass the burden on to others and keep Mylan profits exorbitantly high. A common tactic employed by other pharmaceuticals in the wake of similar crises has been to increase public relations spending with campaigns highlighting lives that have been saved by their respective drugs. Such a strategy is counterintuitive; it is already well know how necessary the drugs are, without that simple fact consumers would not put up with so much from the providers. Rather than spending more on PR, Mylan should reduce the price of EpiPen. Admitting fault and cutting the price would be a simple and direct way of winning back public trust, but such a solution is unlikely. If Mylan is intent on keeping the current price, true collaboration with consumers may never be possible. Potential solutions could include implementing different pricing plans that would at least spread out the price hike further over time or making the EpiPen available in a single dosage rather than mandating a 2 pack. Regaining trust with consumers will require significant effort and transparency from Mylan, which has to this point proven itself incapable of either.

Government/Congress

Stake – Interest

The government has an interest in Mylan because it has a duty to look out for the American people. Medicine is a unique industry in that monopolies can form through the inability of other firms to create a product safe enough to hit the market. Pharmaceutical companies have developed into a major industry in the United States, so governmental interest is necessary to adequately serve the people of this country. Further, pharmaceutical companies spend a significant amount of money lobbying lawmakers and the impact is seen through governmental interest to their causes and initiatives.

Attributes – Legitimate, Powerful

Currently, the government serves as the only force that can reasonably seek to control large pharmaceutical companies like Mylan. Such companies are sure to see government as a legitimate threat, otherwise they would not spend what they do on lobbying. The government has literally created the legal landscape that Mylan operates in and the firm knows that the legal environment is continually subject to change. Consumers have voiced their displeasure with so much furor in an effort to get the government to implement changes that it has the power to do. In the past, the Senate Finance Committee ruled that Gilead Science priced a drug for revenue rather than affordability and accessibility, so a similar ruling may come the EpiPen. The need may be urgent with the government as a stakeholder, but Congress has operated far too slowly in recent years to justify putting “Government and Urgency” in the same sentence.

Responsibilities – Legal

Simply put, Mylan has a legal obligation to the government. In order to remain an operational firm, Mylan must obey laws put forth by the government. Creative “solutions” may be employed by the company to get around some of the more restrictive laws, such as when Mylan moved its headquarters to the Netherlands, but Mylan must operate within the legal scope of business nonetheless.

Strategy – Collaborate

Thus far, Mylan and similar pharmaceuticals have demonstrated a desire to collaborate with the government. Unfortunately, that has been seen through the spending of millions of dollars to lobby lawmakers. Big pharmaceuticals have sought collaboration with government through means that look eerily similar to bribes. Other collaboration methods should be possible, but in Washington nothing talks like money. Congress has pressured Mylan to explain the surge in price, so the situation remains developing. A beacon of hope lies in the fact that Mylan and similar companies do possess the industry knowledge that is necessary to enact positive change. Such knowledge, combined with the power of Washington, make the potential for positive reform a dream that is worth keeping alive.

The FDA

Stakes – Right

The FDA has a rightful stake in Mylan because its role is to maintain and monitor drugs. Mylan is a powerful and large company, so the FDA must pay close attention to the firm to dutifully perform their duties to the government as a whole and the American people.

Attributes – Legitimate, Powerful

The FDA’s attributes are similar to that of the government and Congress. In addition to the above reasoning, the FDA has a direct relationship with the fate of Mylan as a company. Equally important is the FDA’s role in Mylan’s current domination of the marketplace. The FDA is responsible for approving drugs that could potentially rival EpiPen. While the FDA has been criticized for being too restrictive in terms of discouraging new drugs to hit the market, the agency is ultimately responsible for protecting patients from drugs that are potentially dangerous. From Mylan’s perspective, the FDA is powerful and legitimate because it represents the biggest entity that could restrict Mylan’s influence. Any competitor to Mylan must go through the FDA and Mylan has done what it can to stay on the FDA’s good side. The worst scenario for American consumers is Mylan wielding so much influence on the FDA that competitors do not stand a legitimate chance of being approved. Whether that represents the current situation is debatable, but it is certainly a worry.

Responsibilities – Legal

In order to remain in its current profitable situation, Mylan must remain in regulatory compliance. By having monopoly like Mylan does with EpiPen, very little can stop the profits and power the company currently enjoys. A legal breach is one of the only things that is currently feasible as a means to tear down the Mylan empire, so the firm will be careful to avoid such a disaster.

Strategy – Monitor, Collaborate

Mylan will continue to monitor laws and initiatives that are implemented by the FDA. It is in Mylan’s best interest to remain a partner with the FDA, so lobbying will continue to be an important tool the company uses to keep its current position. Potential competition will be heavily vetted by the FDA, so Mylan can also learn a lot about its potential rivals by monitoring all that goes on with the FDA.

Media

Stake – Interest

The free world relies on the media to provide insight into important situations affecting the public. Mylan’s exploitation of the people it should be protecting is certainly worthy of mainstream attention and the media has provided that. Media outlets have an interest in the scandal because accurate and pointed reporting boosts their credibility and enhances the reputation of media as an industry. Accurate reporting benefits both the public and media outlets, so the media’s interest in this and accompanying stories is significant.

Attributes – Urgent

The media is treating the Mylan scandal with great urgency and should be commended for that. With such slow-moving forces in play as big corporations and government, urgency has to come from somewhere and the media has provided that. Many articles regarding the price hike have been incredibly critical of the firm. With so much newsworthy events in the cycle, the articles have to be pointed and critical to get the message across and to the public spectrum. While Mylan has lobbied with money, the media can lobby by getting the public behind the charge to increase transparency and reach a fair solution.

Responsibilities – Legal, Ethical

The media has legal and ethical responsibilities to report the scandal accurately and truthfully. Price gouging vulnerable consumers who need a drug to prevent them from dying of allergic reactions is heinous enough, so the media should be able to criticize Mylan without exaggerating the story past the scope of truthfulness. Journalistic integrity is important so that the public can trust its news sources. Rumors must be limited and reported as such and the media is legally obligated to report without libel or slander. Legal and ethical reporting will allow the saga to play out transparently and that is better for all.

Employees

Stake – Right

Employees have a rightful stake in the organization because it affects their personal and professional reputation. Many employees have absolutely no influence in Mylan’s decision to raise the EpiPen price yet will be associated with it because of the company name. The company must do its hard working employees right by its actions.

Attributes – Legitimate, Powerful

Any company would fail without its employees, so their stake is clearly legitimate. Employees also have influence because companies lose money when employee turnover rate is high. If employees sided with the public and started hating the concept of working for such a controversial company, they could leave for a competing firm and Mylan would take a loss. Employees also have the option to strike, which would hurt both Mylan’s reputation and production. Mylan must keep its employees on its side during this crisis or it will be faced with more problems.

Responsibilities – Legal, Ethical

The nature of the pharmaceutical business requires employees to be ethical. Employees may have access to confidential medical information. Additionally, the methods and ingredients for drugs such as the EpiPen should not be transferred from company to company, so employees have a responsibility to the industry.

Strategy – Collaborate

It is in Mylan’s best interest to maintain a positive relationship with its employees. The company should take steps to make clear to its employees that they are not responsible for the scrutiny that the higher ups in the company have brought on. To take it a step further Mylan should issue a statement to employees saying that it will understand and support any employee who no longer feels comfortable working at the organization and will seek other employment. Mylan should write recommendations for employees looking to leave and help them in the transition to the fullest of their capabilities.

Owners

Stake – Ownership

Mylan is a publicly traded company and its shareholders are impacted by the crisis and its eventual resolution. Mylan’s CEO, Heather Bresch, has the biggest stake from an ownership perspective. Her rapidly increasing compensation and the aftermath over an unearned (and consequently revoked) MBA have not put Mylan in the best place, EpiPen crisis aside. Those with the most to lose or gain from the direction of the company must act in accordance with what is best for the company and its other shareholders. Mylan’s previous CEO faced heavy scrutiny for allowing his son to travel to his musical acts with the company jet. Owners have to portray the company in good faith and Bresch and Mylan have failed on that front.

Attributes – Legitimate, Powerful

Bresch and other powerful owners of Mylan have the power to reverse position on the EpiPen price and work to put the situation behind them. Conversely, they can continue to justify the price increase or lobby others to pick up the cost. Owners are legitimate because it is through them that the fastest changes can be made in the company. Media pressure and governmental legislation may eventually combine to constrain how Mylan can price the EpiPen, but the easiest means to reduce the price would be through ownership initiative.

Responsibilities – Legal, Economic, Ethical

Owners have ultimate responsibility and the most control of the organization. It is the owners’ responsibility to keep Mylan in legal compliance. Such legal responsibility drove the decision to domicile in the Netherlands and benefit from their tax structure. It is also ownership responsibility to keep Mylan economically stable. This responsibility has been used as justification for the price hike, but the suddenness and extent of the increase make this explanation appear stretched. Ethical actions are an important aspect of ownership because it is critical in maintaining the reputation of the company. Breaching ethical obligations can destroy a company’s lasting reputation.

Strategy – Collaborate

Owners and the board of directors should always be collaborating in an effort to improve the company. Collaboration is especially important during crisis management, as each decision and action will be met with scrutiny from the media and public. Companies that successfully rebound from a crisis have the potential to be loved and appreciated for correcting their flaws. Others will only survive as long as the lack of competition allows. Collaborating through the crisis will shape where Mylan goes as a company.

Insurance Companies

Insurance companies have an interest in the Mylan situation because Mylan has already made an effort to push the increased costs from the consumers to the insurance companies. Mylan representatives have criticized high deductible health plans that have been gaining popularity in recent years. While Mylan is correct in stating that those with high deductible health plans will likely now pay more, it is a result of Mylan’s price hike more than the insurance industry. As a risk management and insurance major, I have learned in class that such plans can provide a cheaper alternative, albeit a riskier one, to traditional insurance plans. While high deductible health plans do have more risk involved for the consumer, they have on average cost consumers less and are thus becoming more popular. Attempts by Mylan to criticize insurance companies for their own selfish decision to take advantage of consumers is unethical. Public understanding of insurance is already limited, so Mylan spreading false truths and unjustly blaming the industry is especially damaging to the public good.

Attributes – Powerful

Insurance companies remain powerful because they serve as a tool to protect people and provide stability to the economy. As health insurance is now mandated, insurance companies continue to gain influence. Insurance is also one of the most regulated industries in the United States, so the government will be well aware of how Mylan’s decisions are shaping the economy. The close relationship between insurers and the government should put Mylan on notice.

Responsibilities – Economic

Insurance companies will end up footing some of the bill for the increased hike in EpiPen prices. The portion of the bill that insurers pick up has yet to be determined, but insurance companies have an economic responsibility to pressure Mylan into pricing the EpiPen at a fair rate. While insurance companies will continue to pay valid claims, they also a responsibility to influence Mylan into lowering the price of Epipen.

Strategy – Defend, Collaborate

Mylan will likely be on the defensive against insurance companies and continue to blame them for the drug’s withering accessibility. Insurance companies also have a deep understanding of how healthcare and pharmaceuticals operate as an industry and that will leave Mylan feeling threatened. In order to collaborate and work toward an ethical solution for the public, Mylan must drop its initiative to get the EpiPen labeled a “Preventive” device and drug. Drugs that are labeled preventive can be accessed by those in need without an insurance copay. On the surface, this move would appear to be a great move to benefit its users. In reality, the label would allow Mylan to continue raising the price of EpiPen and possibly do so with less public criticism. As an industry, insurance companies will not be content to pay whatever Mylan wants to charge (and they should not be content to do so), but if such a law is passed that labels EpiPen “preventive” insurance companies will provide it without a copay. In order to do so and remain solvent, the companies will have no other choice than to raise rates for everyone. Rate increases would be absolutely necessary because insurance companies need to maintain established reserves so that claims can always be paid and people can be made financially whole through devastating illnesses. Labeling EpiPen “Preventive” would be a transparency nightmare and would increase costs for everyone who has insurance, which theoretically is every adult in the US. It appears the collaborative solution between Mylan and insurers is the same that has been mentioned before. Rescinding the price hike will return the drug to an appropriate cost and will avoid drastically altering the insurance landscape for all.

Taxpayers

Stake – Right

Taxpayers have a right to a stake in this saga primarily because of the subsidies Mylan has proposed to help poorer consumers pay for the lifesaving drug. It appears that Mylan’s best solution to this point is for any group besides themselves to pick up the tab for the sudden increase in price. Taxpayers should not sit silent while Mylan CEO Heather Bresch approaches a salary of $30 million per year then demands that others pay more for the Epipen.

Attributes – Legitimate

Americans generally believe that they are overtaxed and do not appreciate wasteful spending. It is not up to debate whether poor people should be able to get the drug, medicine must be accessible regardless of the ill’s wealth, but who should help pay is a relevant issue. Mylan-proposed subsidies are mostly a means of attempting to avoid blame while still getting money out of people who could use it for better causes than submitting to the greed of the company.

Responsibilities – Economic, Ethical

While taxpayers may not be able to outright avoid paying taxes that are unjust, it is their responsibility to the good of society to try and keep the use of tax dollars a productive one. Paying taxes is ethical because they do benefit society, but pushing for their efficient use represents ethical action as well. Continuing to pay taxes while simultaneously advocating for transparency and reform is the most responsible course of action for taxpayers at the current time. This will ensure that poor people are financially supported in their quest for medicine, while also bringing attention to an issue that should not simply be put to rest.

Other Pharmaceutical Companies

Stake – Interest

Other pharmaceutical companies have an interest in Mylan’s response to the EpiPen scandal, as the incident holds repercussions for the entire industry. How the Mylan situation plays out has the potential to affect how all pharmaceuticals are treated by the FDA and Congress. As the EpiPen does not represent the industry’s first dabble with price gouging, it and the crises before have begun to form a troubling pattern. Eventually, consumers will have to be protected and the entire pharmaceutical industry will be on notice as the Mylan situation develops.

Attributes – Legitimate, Powerful

Other pharmaceuticals have a legitimate stake. These firms compete with Mylan and operate within the same legal and regulatory environment. This industry is one where regulation drives the products available to the market and the ability to get a drug approved is equally important to the ability to develop it. Other pharmaceutical companies pose a powerful threat to Mylan because they alone can put a competing drug on the market. Consumers will continue purchasing the EpiPen because the stakes are so dire, but are unlikely to possess much brand loyalty to Mylan if competing options are presented.

Responsibilities – Ethical, Legal

Society expects other pharmaceuticals to operate ethically as they compete with Mylan. It is the public’s hope that Mylan represents an unethical exception in the industry and that other firms are not trying to capitalize on the sick and desperate in a similar manner. Other pharmaceuticals also must be ethical in their development of a potential drug and device that could supplant the EpiPen. Any new drug must be developed without taking illegal or otherwise unethical shortcuts and must be able to wholly serve those in need of its protection.

Strategy – Defend, Collaborate

Mylan will defend itself from criticism that other pharmaceuticals have for their methods. Although defense of unethical behavior is not warranted, it is the path that Mylan will be forced to take until the situation is resolved. Collaboration is possible because industry professionals are not isolated. Networking is a defining aspect of any industry and the top minds in “Big Pharma” have the industry and general business knowledge to work toward a better solution for all.

Future Generations

Stake – Interest

Future generations have an interest in how this saga and others play out. A societal goal should be to keep life-saving medicine and devices accessible to all, so future generations have an important stake in the resolution of this crisis. Leaders today must do what they can to keep future generations in mind. An ethical environment must be maintained to ensure that those in the future will have equal opportunities to survive and prosper.

Attributes – Powerful

Change is one of life’s few constants and future generations will rightfully have the opportunity to enact change. It is near impossible to predict what the drug industry and its regulatory structure will look like even 50 years down the road. The landscape of the pharmaceutical industry cannot perpetually remain unjust to consumers, so it is only a matter of time before the impact of future generations is felt and positive reform is enacted.

Responsibilities – Ethical

It is the responsibility of all to protect future generations. Refusing to do so is simply selfish and represents unsustainable greed. Just as the environment must be protected, so do the various legal and business environments on which our society operates. Continuing to manipulate consumers and regulators will set society back and make it harder for the human race to advance and improve. Future generations deserve the opportunity to live in a just society.

Strategy – Monitor

Mylan and other companies should monitor their practices so that the industry can remain sustainable. Despite the company’s greed and flaws, Mylan still does benefit society through the drugs and services it provides. Improving operations both ethically and efficiently will benefit society as a whole and future generations will be better off for it. Mylan is hardly the first company to be involved in a scandal, but it can still change practices and improve for the good of society.

Conclusion and Takeaways

Thus far, Mylan’s decision to exorbitantly raise the price of the EpiPen has been a detriment to society and the company’s reputation. Across industries, scandals are characterized by the deed and the cover up. Mylan has attempted to cover up its action by trying to push the price increase to others. Insurers and taxpayers have been summoned to help those who can no longer afford the EpiPen. While this is not terrible in its own right, the circumstances surrounding the need for others to subsidize the EpiPen are troubling. Because it has no active competition for the EpiPen, the market cannot drive the price of the product. Mylan is therefore responsible for appropriately pricing the Epipen, but has allowed greed to take precedence of keeping the drug and device easily accessible to all. Optimism can be found through the realization that Mylan, competing firms and the FDA possess enough knowledge of both the industry and legal environment to work toward a solution. The urgency at which such a solution is reached is yet to be determined, however, and the public will be kept at bay until significant changes take place.