EpiPen: the most recent illustration of the failure of government

The news is full of stories about the 500% increase in the price of an EpiPen (two EpiPens, actually, for reasons that appear below). The immediate reaction of many, including too many conservatives, is to assume that there is a market failure and to demand government intervention. But that gets things precisely backwards; this is a failure of governance, not a markets.

So let’s take the issues presented here in turn, John McLaughlin (RIP) style.

ISSUE ONE: OVERREGULATION

It takes far too long and far too much money to get a Drug or Device (this is a device; the drug is cheap and has been available for a century, more or less) to market. There is a similar, competing device. But it was recalled even though (i) its failure rates are—according to some accounts—not materially different to the EpiPen and (ii) those failures likely were due to user error by folks who did not learn how to use it before the crisis hit. Also, there is another product that is in the pipeline awaiting approval. But as things stand today, EpiPen has a monopoly on its delivery device. Monopolies tend to drive up prices and—key point—this monopoly is the result of government policy, not corporate malfeasance.

ISSUE TWO: ARTIFICIAL DEMAND

Demand for the EpiPen has been artificially driven up, in two ways. Statutes that mandate how many EpiPens are available at educational institutions and the mandate that they be sold only in two packs (if a parent or school uses one of a two pack, he or she cannot buy just one replacement pen). Having adequate supplies on hand is certainly a good thing. Having government determine exactly what an adequate supply is in each case less so.

ISSUE THREE: WHO PAYS THE BILLS

40% of American children are on Medicaid or SCHIP. Most of the rest are on health insurance. This price increase was targeted at insurers and, especially, state and federal governments. In effect, Mylan, the maker of the EpiPen, has convinced governments to buy more of its EpiPens at a higher cost. The individuals who got hit are really collateral damage.

All of this is to say that it is no surprise that the head of a pharmaceutical company is the daughter of a Senator who started out as a lobbyist, rather than a scientist or manager, since the business plan is neither to compete nor innovate, but instead to use the government to suppress competition and innovation.

But the real story is lost in a simplistic narrative in which—stop me if you heard this one before—the markets are invariably the problem and government is invariably the solution. As conservatives, we need to be able to provide a counter-narrative, and make sure it gets into the wider culture. Otherwise, we will continue to win debates, to the extent our discourse merits that name—and lose elections.