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We need something more sweeping than Dodd-Frank for pharma, Howard Dean says

The pharmaceutical and health-care industry needs reform "far more sweeping" than what Dodd-Frank did for the financial industry, former Vermont governor Howard Dean said Friday.

His remarks were in response to the recent controversy over Mylan's $608 EpiPen.

"We pay for medicine on a fee-for-service basis in this country. As long as we keep doing that, we're going to keep encouraging this kind of stuff," Dean, who is also a doctor, said in an interview with CNBC's "Power Lunch."

Fee-for-service medicine is a method where health-care providers are paid for each service performed on a patient. Critics say the payment model pushes up costs.

"You pay us to do as much as we possibly can whether it works or not," said Dean. "The only way you are going to get budgetary predictability by the payers, both private and public, is to get rid of fee-for-service medicine and do all this . . . at a capitated basis."

On Thursday, Mylan CEO Heather Bresch addressed EpiPen's repeated price hikes in an interview with CNBC. She said she was "frustrated" and said middlemen added to the ultimate cost.

She also said she hoped the issue was an inflection point for the country.

"Our health care is in crisis. It's no different than the mortgage financial crisis back in 2007," Bresch said.

Despite his calls for changes in the health-care system, Dean wasn't indicting the entire pharma industry. He called Bresch an "outlier CEO."

"This is predatory behavior by a particular drug company, and there's really not an excuse for it. I don't see the other pharmaceutical companies doing this kind of predatory behavior and these kinds of outrageous price increases," said Dean.