Mylan Reportedly Paid Its Top Execs More than Industry Giants

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Mylan, the Amsterdam-based company facing copious scrutiny from the media, consumers and politicians for its drug pricing practices, ranks second-highest among all U.S. drug and biotech firms in executive compensation, reports the Wall Street Journal.

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The finding comes from an analysis conducted by the publication on pharmaceutical and biotech pay data from S&P Global Market Intelligence’s ExecuComp service. The analysis reveals the EpiPen maker paid its top five executives a total of $292.1 million over the five years ended last December. Annual pay includes salary, bonus, the estimated value of stock and option awards and other compensation.

Mylan’s combined total surpassed industry rivals several times larger, including Johnson & Johnson, Pfizer, Bristol-Myers Squibb Co. and Eli Lilly & Co., according to the analysis.

Mylan’s combined total was also higher than Vertex, Allergan, Merck & Co., Amgen and AbbVie, among other companies. The only company with a combined total that surpassed Mylan was Regeneron, which paid its top five executives a total of $518 million during the five-year period.

The Wall Street Journal states Mylan’s No. 2 ranking is due to the fact the company paid three top executives–Chairman Robert J. Coury, CEO Heather Bresch and President Rajiv Malik–a total of at least $70 million each over that five-year period. As the price of EpiPens increased, so too did the salaries of Mylan’s executives.

The price of EpiPens has increased by 400% since 2007, with some patients now paying up to $700 to fill their prescriptions. Amidst these price hikes, executives at the Amsterdam-based company saw substantial pay increases, reported NBC News.

In 2007, CEO Heather Bresch earned about $2.5 million, and by 2015 her salary hit just under $19 million, marking a 671% increase. During that same period, the wholesale price of EpiPens rose from $56.64 to $317.82, representing a 461% increase. Mylan’s president Rajiv Malik saw his base pay increase by 11.1% to $1 million in 2015. Anthony Mauro, chief commercial officer of Mylan, saw his salary jump 13.6% to $625,000 in 2015.

In response to the WSJ analysis, Mylan said in a statement that its business is complex and highly competitive, and

“. . . our effective management across our regions and portfolio has allowed us to consistently deliver strong performance for shareholders, year after year.”

Mylan also said its executive pay programs have been approved by shareholders, and management structure changes and some extraordinary matters over the five-year period makes “impossible” any “apples to apples” comparison of executive pay with its peers, the report states. (Source: Becker’s Hospital Review)

Steve’s Take: The only company on the the Wall Street Journal’s list with higher executive compensation than Mylan over the five-year period was Regeneron, a biotech firm with a successful eye drug used to treat blindness in the elderly.

Regeneron’s stock price has quintupled over the past five years, even with a decline in the past year, and the company told the Journal that its industry-pacing executive pay is a reflection of that past stock performance. (Rengeron also made it on Fortune’s ranking of the 100 Best Companies to Work For in 2015.)

Mylan’s own stock is down roughly 24% so far this year, but it improved by more than 150% during the five-year period tracked by the Journal. Shares have been hit hard lately due to the backlash over the soaring price for its life-saving EpiPen.

Fortune reports that some analysts have suggested Mylan’s extravagant EpiPen price hikes were a result of financial incentive plans previously approved by the company’s board that reward top executives for hitting aggressive per-share earnings targets by 2018.

The Journal previously reported that the one-time financial award stipulated by Mylan’s board could be worth up to $82 million overall for the company’s top five executives, with analysts suggesting that the 2018 target would be difficult for Mylan to reach without increased revenue from the EpiPen (which accounts for roughly 10% of the company’s sales).

Earlier this week, Mylan agreed to turn over financial documents to Congressional lawmakers who are eager to take a close look at the company’s pricing practices, according to Fortune. The U.S. House Committee on Oversight and Government Reform asked Mylan for documents detailing its pricing, including the decision to offer steep discounts to some customers, while various lawmakers have also called for the Federal Trade Commission to launch an investigation into Mylan’s price hikes.

The biggest question I have in this double-edged brouhaha over excessive executive compensation and product price gouging is this: Is it really savvy, let alone legal, to rain-down millions of dollars on the EpiPen execs who had nothing to do with the life-saving technology but were adept enough to position its $15 product to rake-in billions for its shareholders at a price to consumers of over $600 a unit?

Steve's Take: Is it savvy, or legal, to exorbitantly pay executives who gouge consumers? Click To Tweet

If this isn’t a classic case of “making hay while the sun shines,” I don’t know what is. To the execs’ credit, with just two such medicines available in the marketplace, they have seized a 90% stranglehold of it, with the resulting ability to mark up the price because lives depend on EpiPen.

All of the Congressional sound and fury in this case, frankly, signifies nothing in reality. As long as everyone whose lives depend upon EpiPen gets relatively easy access to it, I can live with the pricing shenanigans. Mylan already has one foot out of the US with its corporate migration to Amsterdam. Why wouldn’t it take advantage of its window of opportunity while competitors slog through the FDA approval process?

I don’t suppose the fact that Mylan’s CEO, Heather Bresch, is the daughter of a US senator has anything to do with the travails companies with potentially competing products are ensnared by during their FDA approval gauntlet. Every day that ticks by where we as consumers are faced with a $600 product without what might be a $20 rival means additional, huge profits (is 400%+ huge enough?) in Mylan’s and its execs’ coffers. Only (okay, mostly) in America.