“The greed is amazing, it’s sickening, it’s disgusting,” Representative John Duncan (R-Tenn.) said as he summed up his thoughts at the House Oversight and Government Reform Committee hearing to gauge the rising price of life-saving EpiPens . “And I’m a very conservative, pro-business Republican.”
The rest of the committee was similarly disgusted, but the hearing still lasted nearly six and a half hours until late Wednesday night. Throughout, Congressmen on both sides of the aisle were grilling and chastising Heather Bresch, CEO of Mylan Inc., maker of EpiPens. With only one small competitor, Mylan has 90 percent of the market share in epinephrine autoinjectors, which reverse deadly allergic reactions. Since purchasing the EpiPen in 2007, the company has increased the price 15 times, a total increase of 500 percent. EpiPens went from about $50 each to $608 for a pack of two. Millions of people – mostly children – need constant access to a pen. At the hearing, several congressmen spoke of the countless tearful parents they’ve spoken to who are struggling to afford the devices they can’t help but buy.
But as consumers struggled with medical bills, Bresch saw her company’s profits soar, as did her own salary. Her compensation rose from $2.4 million in 2007 to nearly $19 million in 2015 — a point Duncan was happy to clarify after Bresch told the committee her current salary was about $18 million.
“Ms. Bresch earned $18,931,068 in 2015,” he noted. “I suppose when you get to a salary of that level, you easily forget about an extra $931,068 over time.”
But Bresch did not languish under the hard scrutiny; she previously defended the company’s awards, even stating on several occasions that she “couldn’t be more proud” of Mylan’s work. In her testimony and responses, Bresch portrayed the company as humanitarian, committed to educating consumers about deadly allergic reactions and the need to stock epinephrine autoinjectors in schools and other public places. She also blamed the complexity of the US health care system on drug pricing obscurations and argued that the EpiPen was not the cash cow it appears to be. She testified that the company only makes a measly $50 profit from each pen.
But when pressed on the math behind that number—and several others—Bresch gave incoherent and contradictory answers. At various times, she said she didn’t know key numbers, including the total amount of profit Mylan makes from EpiPen sales.
“She knew exactly what the hearing was about,” said Elijah Cummings (D-Md.), a post-hearing ranking committee member. “But she didn’t answer.”
Bresch did answer one question: whether she had any regrets. She testified that she regretted not anticipating her clients’ financial woes.
“You raised the price, what did you think would happen?” asked committee chair Jason Chaffetz (R-Utah).
“We raised the price over eight years,” Bresch replied, perhaps suggesting that the gradual increase may have gone unnoticed.
Bresch arrived at the hearing armed with a stack of large charts and graphs, which several congressmen said were unclear and condescending. A chart featured EpiPens’ earnings breakdown and became a sticking point at the hearing.
The chart shows how a $608 EpiPen two-pack works out to just a $100 profit (or $50 per pen) for Mylan. After discounts and rebates for pharmaceutical managers and suppliers, Mylan averages $274 per two-pack, according to Bresch. She reported that the company sells 4 million two-packs a year, which would generate sales of about $1.1 billion. But after Mylan pays its manufacturing partner ($69 per two-pack) and covers undefined costs ($105), only $50 per pen is left as profit.
Making a $50 profit on a product that only costs a few dollars to make (epinephrine alone is a generic drug and a dose costs less than a dollar) may seem like a healthy profit margin to most. However, Bresch downplayed it as meager.
Chaffetz was unconvinced, suggesting she was clouding their actual bottom line. He asked for clarification on what the charges actually were, which Bresch said she would try to give him within 10 days. He was also confused by what Bresch called profit, pointing out that Bresch wrote in a letter to the committee that the $50 will be spent on facility maintenance and research and development costs. He wanted to know which line in the chart included executive pay, which totaled $300 million over the past five years. After some back and forth, Bresch said that employee and executive compensation is not included in the chart and that the actual profit was less than $50 per pen.
“We expect a very professional presentation of your P&L [profits and losses]and these watered-down versions here don’t make any sense,” he said.
Cummings echoed his frustration. “When Mr. Shkreli appeared before us, he took the fifth,” he said, referring to Martin Shkreli, the former CEO of Turing Pharmaceutical, another company that dramatically increased the price of a life-saving drug. “And to be honest,” Cummings continued, “you might as well have taken the fifth, with the kind of information we got here today.”
The committee was equally annoyed by Bresch’s response to its customers’ financial woes and outrage, a response that saw Mylan expand customer support programs and offer them a generic EpiPen. The generic will be the exact same product, made exactly the same way, except it will be sold in a box not labeled with the brand name “EpiPen”. Bresch said Mylan will offer the generic “direct” to consumers for the low price of $300 for a two-pack.
Chaffetz was quick to point out that if Mylan sold the generic directly to customers for $300, sales would exceed the $274 average per two-pack it got for the brand-name version. Bresch insisted there were other fees and charges that would reduce revenue, but she didn’t clarify what those were or what the cost would be if customers bought one through their insurance plan.
In addition to the generic version and the utilities, Bresch praised her company’s public health campaigns to educate people about the need for epinephrine autoinjectors. She noted that many young children who experience a life-threatening allergic reaction (anaphylaxis) do so without knowing in advance that they even had an allergy. So it is crucial that schools and other public facilities always have the devices at hand. She reported that since Mylan bought the EpiPen, the company has “now reached 80 percent more customers” and has given away hundreds of thousands of pens to public schools for free. She reported that the majority of individual customers pay less than $50 after discounts and health insurance.
The committee did not buy it. “Don’t come in here and tell us you’re doing the world a favor,” said Rep. Earl “Buddy” Carter (R-Ga.) said. Carter, a pharmacist, told how he saw a mother burst into tears when he told her the price of her child’s EpiPen.
Several committee members said many of their voters paid more than $50, which Bresch said was a growing problem. They also noted that many costs not covered directly by consumers are simply passed on to health insurers, who in turn increase the price of their customers’ premiums.
“This is the same PR playbook that other companies used,” Cummings said of the utilities and rebates that Turing and other drugmakers have revealed. “Even with scathing criticism and outrage,” he continued, “these companies never, ever, ever lowered their prices.” He was openly concerned that greedy pharmaceutical executives would continue to raise prices, despite the occasional outcry from politicians.
“They fly back to their mansions in their private jets and laugh all the way to the bank as our constituents suffer,” he said.
Shot of hope
Other committee members placed the same blame on the Food and Drug Administration for potentially blocking competitors’ autoinjectors with lengthy product approval processes. Doug Throckmorton, deputy director of the Center for Drug Evaluation and Research at the FDA, also testified before the committee on Wednesday. Throckmorton admitted there are now 2,300 products lined up to be reviewed by the agency, but he noted that commercial confidentiality laws prevented him from revealing whether any of those applications were for an autoinjector. However, Throckmorton noted that the agency has openly encouraged companies to apply for a generic drug or a competitor and would keep the approval process under 10 months for anyone who enters.
Several legislative proposals have now been tabled to prevent or at least shed more light on drug price increases. These include bipartisan legislation sponsored by U.S. Senators John McCain (R-Ariz.) and Tammy Baldwin (D-Wisc.) released last week that requires drugmakers to give the government a month’s notice of price increases of more than 10 percent and to provide a justification for the increase.