Mylan CEO Claims EpiPens Aren't As Profitable As Everyone Thinks

Sep 21, 2016
Originally published on September 21, 2016 6:32 pm

The drug company that makes the EpiPen says it isn't nearly as profitable as many people assume it is.

At least that's the message Mylan NV CEO Heather Bresch will try to deliver to members of Congress today.

Bresch, who is scheduled to testify before the House Oversight and Government Reform Committee, is expected to tell lawmakers that the company earns $100 profit on each two-pack of EpiPen auto-injectors, even though they carry a $600 price tag.

"The misconception about our profits is understandable, and at least partly due to the complex environment in which pharmaceutical prices are determined," Bresch says in prepared testimony. "The pricing of a pharmaceutical product is opaque and frustrating, especially for patients."

Bresch says it costs the company about $69 to make two EpiPens, and after rebates and fees, Mylan receives $274 per EpiPen pack. She says other, unnamed costs absorb an additional $105, leaving $100 in profit for the company.

While the company apparently is looking to use the analysis to downplay its profits, analysts say the margin is still quite high.

Ronny Gal, a pharmaceutical industry analyst at the investment firm Sanford Bernstein, says Bresch's numbers mean Mylan makes a 40 percent profit margin on the device.

The EpiPen is a long, plastic tube that automatically injects a dose of epinephrine — or adrenaline — into a person's thigh to stop an allergic reaction. It's easy to use and portable.

Mylan bought rights to the EpiPen in 2008 and launched an aggressive marketing and awareness campaign. That effort has made the so-called auto-injector a must-have for anyone with a serious allergy — perhaps to bee stings or tree nuts — that may trigger anaphylaxis, a life-threatening reaction in which the airways swell and close.

The company has come under fire in recent months, however, because it raised the price of the device, which has been available for decades, more than 500 percent.

The wholesale price of a single pen was about $47 in 2007, and it rose to $284 this summer, according to Richard Evans, a health care analyst at SSR. But consumers can no longer buy a single pen, so the retail price to fill a prescription today at Walgreens is about $634, according to GoodRX.

Mylan has tried to quell the criticism first by offering customers a coupon worth up to $300 to offset the price of the device, and then announcing it would bring a generic version of the EpiPen to market for half the retail price.

In addition to the investigation by the House Oversight committee, at least three senators have also called for investigations into Mylan's pricing practices. Sens. Charles Grassley, R-Iowa, and Richard Blumenthal, D-Conn., have sent letters to Mylan demanding an explanation for the increase.

Mylan responded with a letter that Grassley, in a press release, said was "incomplete."

Sen. Amy Klobuchar, D-Minn., has asked the Federal Trade Commission to investigate whether Mylan has violated antitrust laws in its marketing of the EpiPen.

And the Senate Finance Committee is reviewing the rebates that Mylan offered to the Center for Medicare and Medicaid Services.

In her testimony, Bresch says the company did not intend for its price hikes to hurt patients.

"Looking back, I wish we had better anticipated the magnitude and acceleration of the rising financial issues for a growing minority of patients who may have ended up paying the full [Wholesale Acquisition Cost] price or more," she says. "We never intended this."

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Heather Bresch, the CEO of the drug company Mylan, got an earful on Capitol Hill today. Lawmakers took turns questioning her over the high price of the EpiPen. It's a device which reverses dangerous allergic reactions, and its price has gone up over 500 percent since 2008. NPR health policy correspondent Alison Kodjak is covering the House hearing and joins us now. And, Allison, what happened at the hearing today?

ALISON KODJAK: Well, Robert, it was quite a scene. She really took a harsh grilling. She was called greedy. She was accused of price gouging. The lawmakers were really trying to get at what this drug costs, what the value is and how much profit Mylan's been making on it because the price has gone up, like you said, from about $100 for two to $600 for two now. The interesting thing is she really didn't want to answer those questions. So she was sort of speaking around the topic. One bit of information that the company did reveal earlier and in her testimony was that they make about $50 in pure profit from each EpiPen they sell which worked out last year to probably about $400 million on these devices.

SIEGEL: Yeah. Heather Bresch did make one big announcement during the hearing about a new version of the EpiPen that is coming out. Tell us more about that.

KODJAK: Yeah, well, not necessarily coming out - she did say that in the next few days they're going to make an application to the FDA, the Food and Drug Administration, on a new version of the device which is, you know, a plastic injector that delivers epinephrine. Epinephrine's not very stable so people who buy these have to buy a new one every year. They're working on one that will last twice as long so that people don't have to keep repurchasing and repurchasing EpiPens. That's only in the application process, so it's unclear how long it would take for it to be approved.

SIEGEL: She is the third major drug company executive who's been called to Capitol Hill on pricing. Do you get a sense that the government is going to take any action after today's hearing?

KODJAK: Well, they - you know, they talked about it. There were definitely a lot of ideas being batted around. The lawmakers are really getting frustrated. Elijah Cummings from Maryland was talking about how they're, you know, feeling like they're victims of a rope-a-dope strategy where the companies come in, take their beating and then don't - nothing changes.

So they have been talking about one - allowing Medicare and Medicaid to negotiate for drug prices, which they're barred from doing right now, and two - changing the prioritization for FDA to approve generic drugs so that drugs with no competition, like this EpiPen - which has been around for a long time - will have a competitor and won't be able to raise prices with impunity like Mylan has been doing.

SIEGEL: That's NPR health policy correspondent Alison Kojak. Alison, thanks.

KODJAK: Thank you, Robert. Transcript provided by NPR, Copyright NPR.