Sunday, August 28, 2016

Follow-up on Mylan, epi-pens and political versus nonpolitical pressure

In Thursday's post, I pointed out the absurdity of Mylan's stock tanking out of fear of political action in response to the rising price of epi-pens.  There will be no legislation passed, the regulatory process is weak, and moral suasion is hippy nonsense.

Mylan has announced, though, that they will provide coupons for those whose insurance doesn't cover epi-pens to help defray the costs.  Interesting, in several ways.  This does diminish some of the horror stories that would have happened otherwise, which takes away political pressure, such as it was, raising the interesting question of whether or not Mylan understands that political action was impossible.

Alternately, this raises the notion that it isn't the political pressure, but the social pressure on Mylan.  I find it difficult to believe that Mylan didn't have someone on staff capable of recognizing the political landscape and the impossibility of imposing price caps.  On the other hand, the social backlash was pretty damned severe.  Those of us steeped in politics often forget that there is a nonpolitical world that other people inhabit.  This was a major news story.  Yes, Clinton tweeted about it, and yes, that was a component of the story, but much as she might like to think so, she isn't the center of the universe.  Political pressure isn't the only kind of pressure.

The decibel level of that nonpolitical pressure (get the music now?) may just have gotten Mylan to look for a way to try to prevent the worst horror stories, so the proposal was the coupon idea for the uninsured.  From the perspective of Mylan's profitability?  That's chump change.

Notice, too, that epinephrine isn't a particularly fancy drug.  What Mylan has is a delivery device that people find convenient.  They've had the market cornered because nobody has gotten a better delivery device.  There's only so much they can push that advantage before some clever engineer figures out something better at a cheaper price.  Competitors have tried and failed.  The higher Mylan pushes that price, the more consumers will take an inferior delivery device anyway.

Buzzword time!  In economics, we talk about "rent-seeking."  Basically, this is trying to get a government-protected monopoly.  That way, nobody can compete with you, and you can jack up the prices however much you want.  Mylan's monopoly in the epi-pen market isn't from rent-seeking.  They do have to worry about competitors, and the louder the story gets, the stronger that pressure gets.  That's economic pressure, not political pressure.  And, if a few coupons can dissuade market entry from potential competitors?  Smart move.

I stand by my analysis that Mylan's stock tanking was an over-reaction, but I have no clue what the proper price of the stock is, and no sane person without inside information should try to trade stocks.  If you aren't risking prison time, follow Warren Buffet's advice and stick with passively managed funds while laughing at these kinds of fluctuations.

Still, interesting lessons for the politics-obsessed here.  Next week, we shall return to our regularly-scheduled discussion of total legislative gridlock, a House guaranteed to go Republican by the urbanization of Democratic voters, and a presidential election nearly lost to Republicans by their nomination of Donald J. fucking Trump in an election that a generic Republican should win.  C'mon, somebody, cause a scandal.  I gotta fill space here.  I'm trying to force myself to write.

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