Amid 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 The rest goes to insurers, pharmacy benefit managers, and other middlemen, because of “an outdated, inefficient system,” as she put it.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.
About the Author Reprints
I thought oblama care was going to fix all these problems? Another lie from the democrats….
Everything is about politics for you. Please stop.
Shame on the immoral, unethical and greed displayed by Mylan’s CEO and the company for its outrageous decision to up the price, beyond affordability for many, while increasing the CEO’s salary by $18,000,000 annually. Perhaps it is how she was raised by her father Senator Joe Manchin of West Virginia but she is an adult and should be held accountable by firing her.
I have been in the Pharma/Biotech industry for 23 yrs. …as I can truthfully say that Heather is giving the entire industry a bad name. .. as everyone does not deserve it. Own up to what you did and stop passing the blame on others that did nothing to hurt the consumer. You should be ashamed of yourself for putting peoples lives at risk. … since they need to eat verses paying the High copays. Please reconsider the cost.
Give Indians some a year and see the pen being made in 50 $. But don’t let the Patent regime and the FDA throttle the manufacturers neck
I would like to see these drug administers actually use part of the massive gold pot they have to find out why so many kids have allegys and focus on cure instead of bleeding family’s dry just to prevent there children from dieing as a father of an anafalactic son this is very worrying
Mylan is a contributor to the Clinton Foundation. I thought Hillary was all about the little people?
Dataprim, did they ever get that fixed? No! Hue and outcry by legislators and it still costs 2500% higher than it did before. Big whoop.
CEO Bresch claims Mylan gets $274 for the Epipen two pack (what, after rebates or is that Mylan’s “factory” price?) yet the cost is $608. If this thing costs $608, what the heck are the middlemen doing that has a value that is greater than the original cost of the product? Seems this also requires some explanation and justification.
Funny that this is a daughter of a prominent DEMOCRAT in the Senate where “conveniently” legislation was passed that massively benefited the daughter’s company.
Subsequently, this fantastically greedy daughter of a Senate DEMOCRAT multiplies her salary by 6-9 times to $18 MILLION dollars immediately after such a narrowly tailored bill is passed. What a COINCIDENCE!
My, my. Kinda hard to square this behavior with EVERYTHING the Globe prints about greed in other spheres of life. A DEMOCRAT daughter rakes it in after her Senate DEMOCRAT father facilitates a bill that gives her a license to steal…..from a product over 30 years on the market.
Geez, funny how the word DEMOCRAT eludes the author, no? Yeah, there’s the tiny “D-WVA” denotation. But its really hard to imagine the Globe (had a Republican father and daughter greedfest been so revealed) would have similarly done EVERYTHING possible to minimize that highly significant detail isn’t it? Ah, more “truth to power” journalism from the Globe……such guts…such “consistency”….
The bill requiring epinephrine auto-injectors was introduced jointly Republican (Sen. Mark Kirk) and a Democrat (Sen. Richard Durban), not her father. So perhaps you should be reminded that party labels don’t always accurately represent congressional voting habits, not nearly as much as lobbying influences them. Just for the record, the GOP benefited from 58% of the industry’s federal contributions in 2012 and 2014 while Democrats received 42%; facts from the CRP. Utah GOP Rep. Jason Chaffetz collected $198K from big pharma in during 2014 alone, so perhaps you should maybe, just maybe, do a little research before you try to paint that picture. Blame big government, the FDA, or whomever else you want…the facts show that congress – ALL of congress – has big pharma money lining their pockets.
You really have to step out of that War with Democrats. It clouds your perspective on issues and makes you incredibly subjective. It’s the overall political system and almost all politicians that have not effectively addressed these issues for decades. The answer is in how we elect these bozos over and over.
The consuming public, regulators and lawmakers should have grave concerns about a CEO who was quite happy to claim having a MBA when, in fact, she was not entitled to one. Here’s what Wikipedia’s entry on Ms Bresch has to say about this quite telling episode:
‘Bresch was an MBA student at West Virginia University until 1998. In 2007, the Pittsburgh Post-Gazette reported that Bresch had claimed to have an MBA degree from West Virginia University, but the university disputed that. The university subsequently awarded her an EMBA despite her not having attained sufficient credits (22 out of the required 48). Her father was governor of the state of West Virginia at the time.
In the ensuing controversy, the university announced in April 2008 that it would rescind Bresch’s degree. Michael Garrison, WVU President at the time, was reported to be “a family friend and former business associate of Bresch”[8] and a former consultant and lobbyist for Mylan.[9] After a faculty vote of no confidence, Garrison and several university officials subsequently resigned.[10][11]’ (footnotes can be viewed at https://en.wikipedia.org/wiki/Heather_Bresch).
At the very least, the Board of Mylan seem to be asleep at the wheel.
Thanks for sharing this. Based on Heather’s suspect business credentials and exorbitant salary it’s hard to see how Mylan shareholders were well served. Too bad Carson Block chose to target St. Jude (which appears to be at least trying to put saving lives ahead of profits) instead of this sad company. Time for an activest investor to step in and at least attempt to fix things.