Lawmakers Unimpressed with Mylan CEO’s Defense of EpiPen Pricing; Fact that She’s a Senator’s Daughter Not Beneficial

geralt / Pixabay

Outraged Republican and Democratic lawmakers on Wednesday grilled the head of pharmaceutical company Mylan NV (Amsterdam) about the significant cost increase of its life-saving EpiPens and the profits for a company with sales in excess of $11 billion.

Mylan CEO Heather Bresch held up an EpiPen as she told the House Oversight and Government Reform Committee that she wishes the company had “better anticipated the magnitude and acceleration” of the rising prices for some families, according to the Associated Press.

Outraged Republicans and Democratics grilled Mylan CEO about cost increase of EpiPens Click To Tweet

“We never intended this,” she said, but maintained that her company doesn’t make much profit from each emergency allergy shot. The list price of EpiPens has grown to $608 for a two-pack, an increase of more than 500% since 2007. Republicans and Democrats have said families struggling to pay for the shots have every right to be angry at Mylan.

Opening the hearing, House Oversight Chairman Rep. Jason Chaffetz (R-UT) said high executive pay at Mylan “doesn’t add up for a lot of people” as the EpiPen price has increased. Chaffetz said executives for the company made $300 million over five years while the list price for a pair of the emergency allergy shots exploded.

“Parents don’t have a choice,” Chaffetz said. “If your loved one needs this, it better darn well be in your backpack.”

Bresch said the company makes only $50 in profit on each EpiPen. But Chaffetz said he finds that “a little hard to believe.” Several lawmakers noted EpiPen’s growing profits over the same period as well as Bresch’s annual salary, which has increased from around $2.5 million to more than $18 million. They also faulted the US Food and Drug Administration for moving too slowly to allow competing products to reach the market.

US Representative Elijah Cummings, ranking Democrat on the committee, said Mylan “jacked up” the price of the product “to get filthy rich at the expense of our constituents.” He questioned whether Mylan would change course in any way following the backlash over its pricing.

“After Mylan takes our punches they’ll fly back to their mansions in their private jets and laugh all the way to the bank,” Cummings said.

In 2015, EpiPen accounted for $1 billion of Mylan’s overall sales of $9.45 billion and about 20% of company profit. Critics say EpiPen would remain profitable at a lower price. A recent analysis by the consumer watchdog Public Citizen (pdf) found that an EpiPen two-pack costs $69 in the United Kingdom, $181.81 in Canada and $210.21 in Germany, according to Reuters.

EpiPens are used in emergencies to stop anaphylaxis, the potentially fatal allergic reactions to insect bites and stings and foods like nuts and eggs. People usually keep multiple EpiPens handy at home, school or work, but the syringes, prefilled with the hormone epinephrine, expire after a year. The company says it has made strides to more widely distribute the drug to schools and others and raised awareness of deadly allergies. That requires investment, Bresch said.

Bresch has some familiarity with Capitol Hill–she is the daughter of Sen. Joe Manchin (D-WV). But lawmakers so far haven’t given any deference to her because she is related to a colleague. Several other committees have called for investigations into the matter.

Bresch noted that Mylan has said it will begin selling its generic EpiPen version for $300 for a pair. That will still bring Mylan multiple millions of dollars while helping retain market share against current and future brand-name and generic competition.

Chaffetz said he was skeptical that the company will lose any money on the generic versions. “This is why we don’t believe you,” he said.

Steve’s Take: After following this story for months, it recently occurred to me that nowhere in all the accounts I’ve read of the circumstances surrounding Mylan’s EpiPen debacle has anyone used the term “price gouging.” I thought for certain that at least one of the lawmakers grilling Mylan CEO Heather Bresch today would finally say the term, “price gouging.” I may be wrong, but in all the accounts of her testimony on Capitol Hill, the term wasn’t used—not once.

So what, after all, what’s the definition of “price gouging?” I went to Merriam Webster and it says: “Noun. price gouging–pricing above the market when no alternative retailer is available.”

“I think many people incorrectly assume we make $600 off each EpiPen,” Ms. Bresch said, according to her prepared testimony released by the House Oversight and Government Reform Committee. “This is simply not true.”

It’s been said that the actual “medicine” (epinephrine) in an EpiPen costs approximately $1. And the applicator costs something, I’m guessing a nominal cost under $5. And there are the production, packaging, marketing and distribution costs. So I do believe that Mylan incurs all the typical direct and indirect costs one might expect for this type of basic device. And they could mount up.

Yes, but as reported earlier in this piece, consumer watchdog Public Citizen found that an EpiPen two-pack costs $69 in the United Kingdom, $181.81 in Canada and $210.21 in Germany. It doesn’t take an IQ above 140 to come to the conclusion that Mylan is making a profit, even with the two-pack price of $69 in the U.K. So, all this baloney about hardly making a profit here in the US with the “branded” price of $608 just doesn’t cut it with anyone not associated with the product’s sale.

But is this price gouging? And, assuming it is, are there any market forces or legal mechanisms that kick in that would force the retail price lower? “There is justified outrage from families and schools across the country struggling to afford the high cost of EpiPens,” panel Chairman Chaffetz, and Rep. Elijah Cummings, said in a joint statement last week.

Sure, there’s “outrage,” but the cash register for EpiPens keeps on ringing while Congress puts on its pre-election dog and pony show for the networks.

Laughable, frankly and sadly, was Bresch’s remark in her testimony Wednesday, when she said: “We never intended this.”

And, of course, she “never intended” to accept her annual compensation increasing from around $2.5 million in 2007, when EpiPen’s price was $100, to more than $18 million now. Her board of directors forced her to accept it. This just blows her credibility about the pricing, let alone her sincerity about her intentions, to pieces. But I’m still not hearing “price gouging.”

Steve's Take: Did Heather Bresch 'never intend' for her salary to grow from $2.5 to $18 million? Click To Tweet

Elijah Cummings, the Maryland representative who chairs the House oversight committee, compared Mylan’s actions to Turing Pharmaceuticals AG and Valeant Pharmaceuticals International Inc.–two pharmaceutical companies that faced recent high-profile criticism for increasing the price of their drugs by 4,000% and 5,000%, respectively. Martin Shkreli, Turing’s former CEO who is commonly known as “Pharma Bro,” faced the House oversight committee in February for his role in increasing the price of a life-saving drug from $13.50 to $750.

“They (Shkreli and former Valeant CEO Michael Pearson) used a simple, but corrupt, business model that other drug companies have repeatedly use–find an old, cheap drug that has virtually no competition and raise the price over and over and over again as high as you can,” Cummings said during today’s hearing.

Mylan CEO’s (Bresch) full testimony has been made public by the House Committee on Oversight and Government Reform. Here’s an excerpt:

“I know there is considerable concern and skepticism about the pricing of EpiPen AutoInjectors. I think many people incorrectly assume we make $600 off each EpiPen. This is simply not true. In the complicated world of pharmaceutical pricing there is something known as the Wholesale Acquisition Cost or WAC. The WAC for a 2 unit pack of EpiPen AutoInjectors is $608. After rebates and various fees, Mylan actually receives $274. Then you must subtract our cost of goods which is $69. This leaves a balance of $205. After subtracting all EpiPen Auto-Injector related costs our profit is $100, or approximately $50 per pen.”

There we have it. All tied together neatly by Ms. Bresch and seemingly above board. So what’s all the commotion about?

Do I believe Ms. Bresch? Let’s see. She grew up, steeped in a highly-charged political environment, culminating in her father being elected a US senator. She’s the progeny of people at the summit of the political power food chain. Also, don’t forget, this is the US pharmaceutical industry. We’re only talking a few billion of our annual tax dollars to save our children’s and parents’ lives, for Pete’s sake.