mid a chorus of criticism over the rising cost of EpiPens — a furor that has sent her company’s stock down more than 10 percent — Mylan CEO Heather Bresch went on CNBC on Thursday to manage a crisis.
But her appearance may have raised more questions than it answered.
Mylan is not lowering the price of EpiPen, though it is expanding a program to help patients with the cost. Some of Bresch’s sharpest critics — including members of Congress and Hillary Clinton — have made clear that’s not enough. Even Bresch’s father, Senator Joe Manchin (D-W.Va.), issued a statement on Thursday saying he’s concerned about high drug prices and wants a “more comprehensive and formal response” from the company.
Here are five questions Bresch may have to answer soon:
Why is the EpiPen so expensive?
Bresch tried to answer that question with a bit of transparency on how drugs are priced, but she may soon discover why other CEOs put in a similar position have been loath to get into specifics.
An EpiPen two-pack retails for $608, but according to Bresch, Mylan’s share of that is just $274. The rest goes to insurers, pharmacy benefit managers, and other middlemen, because of “an outdated, inefficient system,” as she put it.
But that brings up an obvious question: Why does Mylan need to collect $274 for every EpiPen pack it sells?
The simplistic answer is that Mylan is a for-profit company that must return value to shareholders, and with a lock on the market, it’s been able to sharply raise the price on EpiPens year after year. But that explanation won’t resonate with frustrated parents and their elected representatives, who wonder why a decades-old product gets more and more costly.
Bresch’s disclosure may only invite more scrutiny.
Is it valid to raise prices to pay for lobbying?
Martin Skhreli’s Turing Pharmaceuticals and Valeant Pharmaceuticals were once in Mylan’s exact position, yanked before the public to explain why they raised the prices on decades-old drugs.
Their answers echoed a familiar pharma refrain: We need to charge high prices so we can invest in research that might bring about better drugs.
But Mylan is a generics company; it doesn’t discover new medicines. Instead, it has poured its EpiPen windfalls into marketing and lobbying in an effort to expand adoption of its banner product. Bresch said those efforts have cost “hundreds of millions” of dollars. (It even hired actress Sarah Jessica Parker as a spokeswoman for a recent campaign to raise awareness of allergies, though she severed ties with Mylan on Thursday, citing disappointment and dismay at the price hikes.)
Among the company’s successes: lobbying Congress to pass a bill encouraging schools to stock epinephrine auto-injectors. That has made a life-saving product more widely available, as Bresch noted.
But Mylan has a virtual monopoly on epinephrine auto-injectors, meaning any uptick in usage also pads its bottom line.
Is Bresch’s compassion convincing?
“No one’s more frustrated than me,” Bresch said of the EpiPen controversy, beginning multiple sentences with “as a mother” and adding that “the last thing that we would ever want is no one to have their EpiPen due to price.” She related stories of children dying of anaphylactic shock and said the state of American health care was heartbreaking.
But, as CNBC’s Brian Sullivan pointed out, her total compensation reached $18 million last year, and Mylan has ballooned into a $25 billion company thanks in large part to EpiPen.
“Facts are inconvenient to headlines,” Bresch said, but those two data points in particular are likely to be on the minds of lawmakers as they probe the EpiPen case.
Will shifting blame work?
“The system is broken,” Bresch insisted, blaming an insurance industry that has raised premiums and deductibles such that many patients are forced to pay full price for drugs despite having coverage.
But if you ask insurers, premiums go up to account for rising drug costs. And indeed, the average price insurers paid for EpiPen packs has risen from $421 to $635 over the past 18 months, as the New York Times reported Thursday.
The pharmaceutical world is rife with fingerpointing, as drug companies, benefits managers, and insurers insist the other party is to blame for driving up costs. Each can make a convincing case. Can Bresch, and Mylan, play the blame game successfully?
What happens next for Mylan?
Asked whether the company would keep raising the price of EpiPen, Bresch told CNBC only that it would “continue to run a business.”
Valeant, the last company facing such public outrage, dismissed its CEO in the ensuing fallout, working to repair its image as its stock price swiftly dropped.
As with Valeant, Mylan’s price increases aren’t confined to a single product. The company has made even bigger price hikes on dozens of medications.
“Mylan has not addressed the key questions of motivation and intent of its price increase strategy that we believe is at the heart of the public interest,” Wells Fargo analyst David Maris said in a note to investors Thursday.
Meaning the EpiPen story isn’t going away.