Mylan (MYL) CEO Heather Bresch got a rough reception from lawmakers in a hearing on Wednesday over the drugmaker’s steep price increases for its EpiPen anti-allergy product.
Mylan has become ground zero for the debate over rising drug prices in light of revelations that the company hasby more than 500 percent since 2007 when it acquired the treatment. In testimony submitted today before the House Committee on Oversight and Government Reform, the 47-year-old Bresch said it “troubles me greatly that the EpiPen product has become a source of controversy.”
Nonetheless, Mylan has no plans to lower prices for the life-saving treatment, which isn’t covered by most insurance plans.
Bresch took heavy fire from Republicans and Democrats on the House panel. Committee Chairman Jason Chafetz, R-Utah, snapped at Bresch when she said the company didn’t anticipate the public outcry over the price increase. He asked: “What did you think was going to happen?”
Rep. John Duncan of Tennessee, who describes himself as a pro-business Republican, said he was “sickened” by the greed at Mylan. “Yet another drug company has jacked up the price of a lifesaving product for no discernible reason,” said Rep. Elijah Cummings, D-Maryland, the committee’s top-ranking Democrat.
Added Rep. Stephen Lynch, D-Massachusetts: “It’s disgraceful what’s going on here. I think it’s disgusting.”
According to the Centers for Disease Control and Prevention, allergies are the sixth-leading cause of illness, with an annual cost to society of $18 billion. Data from the Centers for Disease Control and Prevention indicates that food allergies result in more than 300,000 hospital visits annually for children under the age of 18.
When Mylan acquired EpiPen as part of a transaction with Merck (MRK), Mylan estimated that fewer than 1 million of the 43 million people at risk for anaphylaxis had access to an epinephrine injector. As a result, more than 1,500 people died annually from allergic shock.
“We read stories of children dying on playgrounds because schools didn’t have access to epinephrine to use for children without a prescription in their name,” Bresch said in her testimony. “We saw this as an unacceptable and largely preventable risk.”
Shares of Mylan have gotten hammered, falling about 27 percent this year, and the negative attention around the EpiPen isn’t likely to help. RBC Capital Markets analyst Randall Stanicky estimates the product accounts for about 11 percent of Mylan’s annual revenue and 14 percent of its profit.
In a recent note to clients, Stanicky, who rates the stock as “sector perform,” wrote that Mylan isn’t getting grief over the EpiPen’s $600 price tag, but rather “it is the magnitude and consistency of the annual price increases.”
Bresch, whose father is Sen. Joe Manchin, D-West Virginia, has also faced a harsh spotlight. Her total compensation has surged an eye-popping 671 percent from 2007 to 2015, when it hit near $19 million.
She survived another embarrassing revelation after being named CEO in 2008 when a newspaper discovered Bresch’s resume said she received an MBA from West Virginia University, but she hadn’t earned one. As the Washington Post noted, administrators had “added courses and grades to her transcript to make it look as if she had completed the required coursework.” WVU President Mike Garrison is a family friend, the paper said.
Mylan, which offers 635 products in the U.S., has spent $1 billion to improve the EpiPen by increasing its availability through patient-assistance programs that it has recently bolstered. The company estimates that 85 percent of EpiPen users pay less than $100 for a two-unit package, and the majority pay less than $500. Moreover, Mylan has also provided 700,000 free EpiPens to schools over the past four years. About 11 states have passed laws requiring that school districts stock the treatment.
However, as Rep. Tammy Duckworth, D-Illinois, pointed out, Mylan required districts that wanted to buy the EpiPens at a discounted rate to promise not to buy a competing product. She also noted that Bresch’s mother, Gayle Conolly Manchin, was involved in lobbying for the requirement. Bresch denied that her mother had done anything wrong.
No doubt, affordability remains a concern for patients. A recent poll of 51 physicians conducted by RBC Capital found 37 percent of patients who needed an EpiPen are unable to pay for it. According to Bresch, Mylan has responded to the criticisms over the price of the treatment by making a generic version, a move she said was unprecedented.
“There is nothing magic about EpiPen,” wrote Dr. Thomas B. Castle, executive vice president of the American Academy of Allergy, Asthma & Immunology, in an email. “It has, however, been the most widely used and publicized epinephrine autoinjector with only one competitor on the market. Once alternatives are available, if they are priced lower, one would imagine they will be utilized to a high degree, although these autoinjectors will require education of the patient about their appropriate use.”