Congressman: “Hard To Believe” Mylan Only Makes $50 Profit On Each EpiPen

Drugmaker Mylan has come under fire in recent months over questions about the cost of the EpiPen emergency allergy treatment, which has jumped in price by around 600% since 2009. In testimony before Congress this afternoon, Mylan CEO Heather Bresch defended the price hikes and claimed that her company ultimately only sees about one-sixth of the retail price for EpiPens.

In 2009, a two-pack of EpiPens had a sticker price of around $100. That same pair of auto-injectors now sells for $608.

“I think many people incorrectly assume we make $600 off each EpiPen. This is simply not true,” says Bresch in her prepared remarks before the House Oversight Committee.

The CEO, acknowledges that the wholesale acquisition cost (WAC) of an EpiPen twin-pack is $608, but says Mylan only receives $274 of that after fees and rebates.

“Then you must subtract our cost of goods which is $69,” says Bresch. “This leaves a balance of $205. After subtracting all EpiPen Auto-Injector related costs our profit is $100, or approximately $50 per pen.”

“I find that a little hard to believe,” said Oversight Committee chairman Rep. Jason Chaffetz (UT) in his statement to the panel. “When the juice [the epinephrine in the EpiPen] is a dollar and you’re selling it for $600, there’s some room for profit.”

Chaffetz also noted that five executives at Mylan, where the EpiPen accounts for around 10% of total revenue, have earned a total of $300 million over the last five years. That, said the congressman, “doesn’t add up for a lot of people.”

Ranking Member Rep. Elijah Cummings (MD) stated plainly that he was “not impressed” with Bresch’s prepared remarks, and said Mylan and other drugmakers were getting “filthy rich at the expense of our constituents.”

Regarding the price change, Cummings accused Mylan of employing a “simple but corrupt business model: find an old, cheap drug that has virtually no competition, then raise the price over and over and over again.”

He also raised questions about Mylan’s marketing campaign for EpiPen, which Cummings noted cost the company $100 million last year alone, even though EpiPen has virtually no competition to advertise against.

The senior members called Mylan’s motives into question with regard to recent changes to its discounting programs, and its plans to launch a generic.

“Suddenly, feeling the heat, feeling the pressure, Mylan offers a generic version at half the price,” noted Chaffetz. “What happened to the other $300?”

The congressman also noted that Mylan will be offering direct sales of the generic. He and Bresch then got into a heated back-and-forth over how much the company would actually make from these direct-to-patient sales. If Mylan is making $300 from such sales, Chaffetz contended then it could be actually making more per two-pack than it does from the brand-name version. Bresch said the company expects to make around $200 per two-pack.

Bresch confirmed that the generic would be identical in every way other than the name, further confounding Chaffetz as to how Mylan could justify the cost for the brand-name version.

The CEO claimed that it was “unprecedented” for Mylan to voluntarily release the generic.

“It’s unprecedented to raise the price 500%,” countered Chaffetz.

As for Mylan’s expansion of the couponing and assistance program, Rep. Cummings said, “we’ve heard that one before.”

“This is the same PR playbook other companies use,” said the congressman. “Just say you’re expanding your patient assistance programs… talk about discounts and coupons and rebates,” but the drug companies “never ever, ever lowered the prices.”

Cummings referred to Mylan’s response to the public outcry and congressional queries as a “rope-a-dope strategy,” meaning the company comes in, takes its punches “but afterwards you’re gonna come out of there and… just keep raising prices.”

Bresch’s opening remarks also obliquely referred to antitrust allegations, involving the EpiPen4Schools program, being investigated by the New York state attorney general.

Recently uncovered documentation for that program, which helps schools stock EpiPens at a discounted price, seems to require that participating schools agree to not buy any products that compete with EpiPen. The New York AG’s office is concerned this may violate antitrust rules, but in her testimony, Bresch boasts about providing EpiPens to 66,000 U.S. schools “with no strings attached.”

While the intense scrutiny placed on Mylan has resulted in the company committing to release a lower-cost generic EpiPen in the near future, and to make its discounting programs available to more consumers, today’s hearing does little to give the government any authority to do much of anything about drug prices.

As our colleagues at Consumer Reports recently pointed out, drug companies can effectively charge whatever they want for a drug.

“No government body… has rules or laws that dictate or restrict the price a pharmaceutical company can set for a drug,” wrote CR. “And in most cases, there’s nothing that restricts how much a company can raise that price.”

Dr. Douglas Throckmorton of the FDA’s Center for Drug Evaluation and Research explained as much to the committee this afternoon, noting that the agency “does not have a regulatory role in the pricing of drug products” though it can work to improve access to important drugs by having an efficient and timely process for approving lower-cost generics.

Throckmorton also points out that approval for an auto-injector like EpiPen is more complex than signing off on a drug, as the end-product involves both the drug and the device.

“While FDA is working to lay out a roadmap to support efficient development of complex products like drugs delivered using an auto-injector… we cannot and will not allow a substandard product, in this or any product area, to come onto the market,” explains the doctor. “For these epinephrine auto-injector products, a patient suffering a life-or-death allergic reaction must be able to pick up and effectively use that device without a moment’s hesitation.”

In 2015, drugmaker Sanofi recalled its Auvi-Q epinephrine auto-injector in North America over concerns about inaccurate dosage delivery, and it has yet to return to the marketplace.

Likewise, Teva’s release of a potential competitor to EpiPen was initially delayed by an intellectual property lawsuit filed by Mylan (a lawsuit that is at the center of a separate antitrust investigation by the West Virginia attorney general), only to have the FDA reject that product in early 2016 for “major deficiencies.” Teva says it is trying again and hopes to have the item available before 2018, though there is no guarantee that will happen or that Teva, which recently sought to acquire Mylan, would price its product significantly lower than EpiPen.

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