George Gibbs Center for Economic Prosperity

Column: As Ep⁠i⁠Pen pr⁠i⁠ces r⁠i⁠se, fam⁠i⁠l⁠i⁠es feel ⁠t⁠he s⁠t⁠⁠i⁠ng of crony cap⁠i⁠⁠t⁠al⁠i⁠sm

By: Sal Nuzzo / 2016

As a youngster growing up in New Haven, Conn., I had a little more to fear than the monsters under my bed. At the age of six, while swimming at my grandmother's pool, an unfortunate meeting with a yellow jacket resulted in a trip to the ER. Two injections later, my parents found out that I had a severe allergy to bee and yellow jacket stings, which could have been fatal.

For seven years after that, I underwent weekly allergy shots and carried a small orange case with a syringe containing the lifesaving drug epinephrine with me just about anywhere I went. By the grace of God and modern medical techniques, my allergy shots were effective and bee and yellow jacket venom has less effect on me now than a mosquito bite.

Enter the EpiPen. It was a miracle for anyone suffering severe allergic reactions. EpiPen technology made it possible for kids like me to not have to worry about someone completely untrained attempting to inject us correctly, subjecting us to the potential for an even greater problem from air bubbles in the bloodstream.

Much like the rest of the public, it is with no small amount of outrage that I look at the drama unfolding with the pricing of EpiPen. I remember realizing that the cost of epinephrine, the drug contained in the EpiPen, was relatively inexpensive to manufacture and was not costly to purchase, even without coverage. What happened to make this seemingly cheap and effective drug so cost-prohibitive for many individuals?

Enter the concept of crony capitalism.

The company that manufactures EpiPen, and its CEO Heather Bresch, are one player in a system of laws and regulation that serves one purpose — to allow politically connected players to eliminate competition through gaming the system rather than innovating and making a better product.

These are the cold, hard, nasty facts of what has transpired with EpiPen, and they should concern anyone who takes any medication. EpiPen is just one example of the future in a crony capitalist system.

Mylan's CEO leveraged her political connections. She spent her time, energy and money as CEO of Mylan Pharmaceuticals lobbying Congress and the Food and Drug Administration for regulations that would all but eliminate the possibility of competitors to EpiPen. Additionally, it begs to be mentioned that Joseph Manchin, former governor of West Virginia and currently its senior senator, is Bresch's father. By using the system in place and political muscle she possessed, she was able to eliminate the competition.

In the absence of Mylan's lobbying, a complicit Congress and FDA, there would be a dozen competitors to EpiPen, and it would almost certainly be available over the counter in any drugstore. There are eight alternatives to EpiPen in some European countries right now. Epinephrine itself costs less than $1 a dose to produce — companies would clamor to get a more reasonably priced alternative into the U.S. market and provide competition to Mylan.

The CEO of Mylan is without question price-gouging consumers — in this case that translates to hurting children who depend on EpiPen to quite literally save their lives. However, Bresch simply did what any savvy CEO would do if given the opportunity — she leveraged the existing rules to her benefit.

As Florida's free-market think tank, we know that when truly unleashed the free market is the greatest force for economic prosperity. Consumer opportunity is market competition. One of the single most critical elements of free market competition is the notion of consistency and fairness among all market competitors. In the absence of that concept, we get $500 EpiPens.

If we want to direct our rage at someone, let's make sure it is the right someone — Congress, regulators and bureaucrats — who set up such a system completely antithetical to free markets. Every time a child suffers a severe allergic reaction to a bee sting, or peanuts, or shellfish or any of the hundreds of other substances that epinephrine works on, remember that it's this system that enables CEOs to price-gouge and make it harder to obtain lifesaving medicines that families desperately need.

We call it crony capitalism — capitalism distorted to favor the well-connected — and it is why we continue to fight the good fight.

Sal Nuzzo is the vice president of policy at The James Madison Institute, Florida's free market research and educational organization.