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Matt BarkerMicroeconomics12/10/2016An EpiPen EpidemicMylan is a company that produces and sells epinephrine auto injectors. These are well known as EpiPens. An EpiPen is used to treat all different types of allergic reactions. Some of these allergic reactions are to food, stings, bites, drugs or any other allergen. This device can save a person’s life by injecting epinephrine which reduces swelling of the throat and stops the allergic reaction. That is why so many people with allergies buy them. Many people buy multiple EpiPens, one for the car, work, home, etc. On top of that, these devices expire so if they are not used, then they must be replaced by a new device. Usually the life of an EpiPen is one year. Prices for the EpiPen have risen significantly. These price spikes have made so many consumers worry that they will not be able to afford the lifesaving injector for themselves and their kids. In 2009, the wholesale price for a set of two injectors was $103.50. In May of this year, the price was $461, and, most recently, the price shot up to $608.61. People are questioning why Mylan can charge such a high price.Price-elasticity of demand (PED) is a measure of the relationship between a change in price and the resulting change in quantity demanded. An elastic product is for which the quantity demanded changes when the price of the product increases or decreases. On the other hand, when the demand stays the same no matter the increase or decrease in price of any given product then it is perfectly inelastic. Mylan’s EpiPen is close to being perfectly inelastic. No matter what price Mylan decides to set for the EpiPen the demand doesn’t change by a significant amount. A good is relatively inelastic when the percentage change is greater than the percentage change in quantity demanded. It is a lifesaving drug, of course people are going to buy it. This allows Mylan to set higher and higher prices, making an even bigger profit for the company. In consequence, it makes consumers unhappy and in many cases in danger financially and physically. With the price of medicine being so expensive, some people consider forgoing a purchase of an EpiPen that could be lifesaving. And others simply just can’t afford to buy it even if they wanted to. That is why the EpiPen isn’t perfectly inelastic because there are consumers that have foregone the purchase of an EpiPen. This is unfair. More people than ever before can’t afford to buy an EpiPen and others are considering to take the risk by not purchasing an EpiPen because the price is so high. Two engineers from Silicon Valley took apart the two pack of EpiPens that retails for $700 to see how much it costs to make. After careful examination, the price they came up with was $8.02. How does Mylan get away with such a high price? Another reason that makes this product so inelastic, and allows Mylan to charge so much, is the fact that there just are not any substitutes for consumers to choose from. EpiPen is the only epinephrine auto injector on the market. Some other companies have made their own version but those injectors have been defective and have had to be recalled. All other competitors have failed. If there were competitors on the market the price would decrease. Consumers could choose other brands of epinephrine autoinjectors that were more affordable and it would force Mylan to lower the prices to stay competitive in the market. Why have these competitors failed? Wouldn’t this be a good market considering demand for this product is always going to be there?When there is only one seller of a product in a market with no close substitutes it is considered a monopoly. This market structure allows companies to set their own prices. Market power is increased when there is no competition. What allows Mylan to have so much market power is the fact that there are no substitutes but also the barriers to entry that don’t allow substitutes and competition to enter the market. Or if they do enter the market they fail right away. Some of these barriers include, product differentiation, patents, laws that require EpiPens to be available in public schools, and other government regulation. High barriers make it very difficult for new competitors to enter the market. Product differentiation is where the buyer identifies the brand name of the firm with the product. An example would be a Kleenex, no one asks for a paper tissue. The same thing happens with EpiPen. Not many people would ask for an epinephrine auto injector. In addition, there are laws for public schools to carry EpiPens. Obama signed this law and even named it the EpiPen law. Families all over the world are scared to try any other type of substitute other than an EpiPen. It is known to work and by having EpiPens in schools and public parks it gives even more market power and assurance to consumers that EpiPen is their only option.Economic regulation sets prices and makes it so the government has a say on new entries into the market. As noted previously, the government is making it difficult for new competitors to enter the market with Mylan. Clearly economic regulation is not working. More economic regulation is not the answer to lower the price of an EpiPen, the answer is to have less regulation so that the market can become a more competitive market. Social regulation is defined as making restrictions on behaviors that threaten public health, safety, welfare or well-being. What does this mean for new competitors? Not only must a new competitor overcome barriers to entry, but it must also have its product approved by the government and the FDA. An average time for a new drug to be approved by the FDA is 27 months. That is way too long if a competitor wants to sell its product for a lower price. The last barrier that I will mention that is helping Mylan create such a powerful monopoly is the fact that they just came out with a new patent claiming they will have an even newer product with better technology. A new patent makes it that much harder for competition to enter the market. The patent creates a period that allows for only an EpiPen to be sold on the market. Mylan has more monopoly power than ever. I argue that there needs to be less regulation and fewer barriers so that competitors can enter the market, create competition and lower prices. With less social and economic regulation, new and efficient devices could be invented and could be more affordable. The EpiPen is, in fact, sold for significantly less in other countries - $69 in the U.K., for example – because there is competition in other countries in which the FDA has no regulatory power. If America followed the example of these other countries, then Americans could also have more affordable epinephrine auto injectors. An epinephrine auto injector is a lifesaving drug and Mylan is making it more and more difficult for people to save their own lives. Works CitedDomazlicky, Bruce. "Market Failure."?Cstl-hcb.semo.edu. N.p., n.d. Web. 03 Dec. 2016."EpiPen Outrage."?Mercury News. N.p., 12 Oct. 2016. Web. 02 Dec. 2016.Graham, John. "Martin Shkreli A Creature Of FDA Regulation, Not Pharma Industry's Greed."?Forbes. The Apothecary, 28 Sept. 2015. Web. 2 Dec. 2016.Graham, John. "Martin Shkreli A Creature Of FDA Regulation, Not Pharma Industry's Greed."?Forbes. The Apothecary, 28 Sept. 2015. Web. 2 Dec. 2016.Johnson, Carolyn Y. "How Mylan, the Maker of EpiPen, Became a Virtual Monopoly."?Washington Post. N.p., 25 Aug. 2016. Web. 2 Dec. 2016.Parker-pope, Tara, and Rachel Rabkin Peachman. "EpiPen Price Rise Sparks Concern for Allergy Sufferers."?The New York Times. The New York Times, 22 Aug. 2016. Web. 03 Dec. 2016. ................
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