Painted as the Latest Pharma Scoundrel, Mylan’s CEO Bresch Isn’t Buying It; She’s Got a Point, Maybe

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Last week Mylan pharmaceuticals CEO Heather Bresch seemingly attained a status of villainy synonymous with Lance Armstrong and, more recently, Ryan Lochte, with news stories of its fourfold price increase on EpiPen while taking a huge pay raise.

Reports cited a 400% price increase for the devices, with families carrying high insurance deductibles bearing the greater burden to access a life-saving, accurately calibrated dose of epinephrine worth about one dollar.

Mylan CEO Heather Bresch attains villain status in the #pharmaceutical drug pricing war Click To Tweet

As The New York Times points out, from talk shows to Twitter, her name is being mentioned alongside Martin Shkreli, the so-called Pharma Bro who sparked outrage last fall over raising the price of the drug Daraprim, and J. Michael Pearson, the one-time McKinsey consultant who took over Valeant Pharmaceuticals International and almost immediately started ruthlessly raising prices on life-saving medicines.

Chief among Bresch’s indictments is that the 400% increase in wholesale price for EpiPen looks measly compared to the gigantic 671% salary increase she’s reported to have benefited from since Mylan acquired the EpiPen in 2007.

According to NBC News, Bresch earned $2,453,456 in 2007, the year of the autoinjector’s acquisition. In 2015, Bresch’s total compensation was $18,931,068. As Emily Willingham point out her piece for Forbes, that newspaper has listed Bresch as #95 on its 2016 World’s 100 Most Powerful Women list.

Her salary, unlike Donald Trump’s tax returns, isn’t concealed: In the bio associated with the Forbes listing, she’s said to have earned $38.9 million in compensation “over the past two years.” That works out to about $19,450,000 a year, a little more than the $18,931,068 NBC reported.

But unlike Messrs. Shkreli and Pearson, Ms. Bresch falls into an entirely different category of Pharma desperado. As The New York Times points out, Bresch is an ultimate insider. Her father is a United States senator. She runs one of the largest generic drug companies in the world. She also oversees the Generic Pharmaceutical Association— the generic industry’s lobbying group.

Many in the mainstream media suggest that the question now is whether her different position will give her a different result. Both Messrs. Shkreli and Pearson were forced out of their companies. Over the years, her brash leadership style has thumped some egos but also, some say, improved access to drugs and raised quality standards. Her company, Mylan, also has a reputation for shameless tactics that have angered competitors and investors alike.

“I think we mean what we say: You can do good and do well, and I think we strike that balance around the globe,” Ms. Bresch said. Still, she was unapologetic that Mylan’s actions were driven by profit. “I am running a business. I am a for-profit business. I am not hiding from that.”

Earlier last week, Willingham aptly noted that Mylan had increased the price on the EpiPen “because they could.”

She added, “Now that they seem to have hit a trifecta of accusations of price gouging, CEO golden pay, and tax dodging for profit and have the Senate judiciary committee nosing around, perhaps this is becoming a case of just because you could doesn’t mean you should.”

But after all the sound and fury of last week’s latest pharma-villain media circus, which sometimes has resembled a bizarre feeding frenzy to excoriate her, attract more eyeballs and, oh by the way, sell more ads, I believe there is a simple reason as to why this has happened–both in the case of Ms. Bresch and previously with Messrs. Shkreli and Pearson. Unfortunately, though, the simplicity of the truth can be challenging cloth from whence we in the media are able to fashion a dazzling costume that will fetch those vital eyeballs.

Steve’s Take: The simple truth is we either have a genuine laissez-faire economic policy here in the U.S. or we don’t. Long ago we adopted the attitude of letting businesses take their own course, without interfering. Definitions of laissez-faire capitalism vary only slightly, but they boil down to the abstention by governments from interfering in the workings of the free market.

I admit to being troubled by what appeared to be a universal, almost joyful bashing of Ms. Bresch and her company when I came upon Sarah Kliff’s prescient piece for Vox. In it she points out that Sen. Chuck Grassley (R-IA) sent the company a letter last Monday asking for an explanation of why some have found themselves paying more than $500 for the generic medication. “

I am concerned that the substantial price increase could limit access to a much-needed medication,” he wrote. Grassley can ask Mylan to explain its prices, and he can express concern. But there’s not much else he can do beyond that. The American government is extraordinary in that it has no power to regulate drug prices.

As Kliff rightly points out, the story of Mylan’s staggering EpiPen price increase is, more fundamentally, a story about America’s unique drug pricing policies. We are the only developed nation that lets drugmakers set their own prices, maximizing profits the same way sellers of cars, wine glasses, gloves, or any other manufactured goods would.

In Europe, Canada, and Australia, governments view the market for medicines and medical treatment as essentially noncompetitive and set the price as part of a bureaucratic process, similar to how electricity or water are priced in regulated U.S. utility markets.

Other countries do this for drugs and medical care–but not other products, like phones or pets–because of something fundamentally unique about medicine: If consumers can’t afford the product, their survival odds drop. In some cases, they face almost certain odds of dying. So most governments have decided that keeping these products affordable is a good reason to introduce more government regulation.

When drug companies set their American prices, they don’t focus on the price of making the pills. Instead, they look at what their competitors already charge for similar products and try to establish their price somewhere in the same range, regardless of production costs or how effective the drug actually is.

Since most drugs are already expensive, new drugs keep matching those prices. And if you’re a drug company that produces the best medication for a situation (as Mylan does for allergy attacks), it’s a no brainer: You have consumers whose lives, quite literally, depend on buying your product.

This is what the now-infamous pharmaceutical executive Martin Shkreli talked about, quite bluntly, in a Bloomberg interview last year. He was defending a decision to increase the price of Daraprim, a drug that treats a rare disease called toxoplasmosis, by 10,000 percent.

“We know these days that modern pharmaceuticals and cancer drugs can cost $100,000 or more,” he said. “Daraprim is still underpriced compared to its peers.”

The real question at the heart of the EpiPen outrage isn’t why one drug company decided to hike a drug price. The real question is why other companies aren’t also taking advantage of the name-your-price nature of American pharmaceutical policy.

Elsewhere in the world, companies and governments wrangle over how much they will pay. Each country uses a different process, but the goal is the same–to balance drug companies’ pursuit of profit with the public’s interest in making useful treatments widely available and affordable.

The United Kingdom, for example, runs its bargaining through the National Institute for Clinical Evaluation (NICE). NICE exists solely to decide at what point a new treatment is cost-effective: when it will save the healthcare system money in the long run by preventing further disease. NICE runs dozens of these analyses each year, on drugs and surgeries and scanning devices. And it uses its findings to tell medical manufacturers: This is the price our country will pay for your service.

In the United States, there’s no such bargaining process to speak of. Federal law bars Medicare, the country’s largest insurance plan, from even trying to negotiate bulk discounts with drugmakers. Once a pharmaceutical company sets its price, the government-run plan that insures 49 million seniors is required to accept it. “For Medicare, the sky is really the limit,” said Jamie Love, who has studied drug pricing and directs the D.C. nonprofit Knowledge Ecology International.

A handful of high-profile, expensive drugs have caused similar outrages to the current Mylan backlash. But drug companies have largely weathered those controversies unscathed, trading a few months of bad press for heaping profits.

Consider the case of Sovaldi, a new hepatitis C drug that came on the market in 2012 at the price of $1,000 per pill. Its maker, Gilead Sciences, faced an immediate, massive blast of pushback over the price; for an entire course of treatment that lasted three months, the drug cost $84,000. Sovaldi was, when it came on the market, the only drug that cured hepatitis C.

And EpiPen is, right now, the best treatment available for an emergent allergy attack. Other pharmaceutical companies have tried to launch competing drugs but so far failed; one drug from Sanofi SA was recalled last year over problems with its injector.

Mylan, in a fashion articulated by Bresch, simply followed the playbook of its vilified forerunners, figuring correctly (so far) that it’s possible to charge much higher prices for a drug and brace for the inevitable hue and cry–but laugh all the way to the bank with the spoils of huge profits, when the day is done.

Certainly, the issue of price gouging is put to rest quickly.

Merriam-Webster defines “price gouging” as: charging customers too much money.

Webster’s Learner’s Dictionary’s simple definition of “gouge” is: to make (someone) pay too much money for something; to subject to extortion or undue extraction; to overcharge.

An example of “gouge” in a sentence: They feel that they are being gouged by the oil companies.

So Mylan is clearly gouging customers for the EpiPen at the moment. Our laws don’t preclude that. Bresch says, in effect, I’m just doing my job here as Mylan chief executive; just looking after our shareholders’ interests. Amen.

Steve's Take: How do #Pharma execs, like Bresch, sleep while patients can't afford their drugs Click To Tweet

But, how does she, or anyone in her position, go to sleep at night knowing there are children with, say, peanut allergies–with possibly fatal episodes–whose parents simply can’t afford her company’s product, and who may or may not survive the trip to the emergency room in time to access the life-saving medicine there. How can she reconcile such a situation, which clearly plays out daily, I can’t really comprehend. Just add it to all the other things I suppose.

What I hope we finally have here with EpiPen is an actual turning point where as a nation we finally take a good, long look at our laissez-faire policy when it comes to the drugs industry and examine whether the European, Canadian and other national policies for a free-market have something to teach us about the health, indeed the lives in this case, of our citizenry. I believe it’s obvious they do.

  • Linda Rosenthal

    Excellent post, with an important – and satisfying – conclusion.