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Mylan CEO's EpiPen Price Arguments Fall Short

In response to customer ire over a list price of $608 for a two-pack of EpiPens, Bresch argued that the high price was necessary.
Mylan Inc. Chief Executive Officer Heather Bresch Interview
Heather Bresch, chief executive officer of drugmaker Mylan Inc., speaks during an interview in New York, U.S., on Thursday, Jan. 8, 2015.Victor J. Blue / Bloomberg via Getty Images file

Mylan CEO Heather Bresch said she shared Americans’ frustration with the spiraling cost of drugs like her company’s EpiPen in a CNBC interview Thursday morning, but her comments hew closely to the company’s marketing strategy.

“I know this is a complicated conversation around healthcare and insurance,” Bresch said, a remark very similar to one she made to investors on the company’s quarterly conference call earlier this month and reflects the company’s long-term marketing strategy.

“We're continuing to try to do our part on educating on that supply chain, and we all know it's complex and our healthcare and insurance is complicated,” she said in response to an analyst question about whether rising patient costs would affect Mylan’s bottom line.

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In response to customer ire over a list price of $608 for a two-pack of EpiPens, Bresch argued that the high price was necessary, saying that Mylan only nets $274 of that cost.

Paul Ginsburg, director of the center for health policy at Brookings Institution, was skeptical of that characterization. “That seems very low for a brand name drug,” Ginsburg said.

In a graphic posted during Bresch’s CBNC interview, the remainder of the cost — $334 per EpiPen two-pack or $1.3 billion in aggregate — was assigned to four parties: pharmaceutical benefits managers, insurers, wholesalers and retailers. But for name-brand drugs, “most of the dollar that the patient pays is going to the manufacturer,” Ginsburg said.

The EpiPen wasn’t always such a flashpoint. In 2007, five years before she would become CEO and the year Mylan acquired the EpiPen, Bresch was earning around $2.5 million, and an EpiPen cost roughly $57. Last year — the same year Mylan completed an inversion that moved its official headquarters to the Netherlands in pursuit of lower taxes — Bresch’s compensation was $18.9 million.

Bresch and Mylan have succeeded in making the EpiPen ubiquitous through a combination of public awareness campaigns and lobbying for legislation that relies on the language of public health discourse to grow the company’s footprint, like the School Access to Emergency Epinephrine Act, which pushes schools to stock EpiPens and have staffers know how to use them.

Read More: Mylan CEO's Pay Rose Over 600 Percent as EpiPen Price Rose 400 Percent

“They have some really interesting brand equity,” said Jason Gerberry, an analyst at Leerink Partners LLC. “I think that’s part of the strategy overall,” he said. “If you can dominate the markets for schools you have a big amount of market share you can lock up.”

In making the case that schools need to be stocked with EpiPens on CNBC, Bresch told the story of a seven-year-old in Virginia who died after suffering anaphylactic shock at school. The school did have EpiPens, she said, but since none had been prescribed in the name of Amarria Johnson, the girl died.

But Johnson’s mother won nearly $700,000 in a wrongful death lawsuit settlement last year, on the grounds that Amarria did have an EpiPen, which her mother unsuccessfully had tried to leave with the school, the Richmond Times-Dispatch reported.

Also while on CNBC, Bresch laid the blame for the price escalation at the feet of the Affordable Care Act, calling the healthcare system broken and calling on lawmakers to fix it.

Lawmakers are listening — and they’re calling for Congressional hearings on the company’s pricing.

High deductible plans are “a pretty small minority of the insurance market… and this was a trend that was going that way even before the Affordable Care Act,” pointed out Samuel Richardson, a Boston College associate professor of the practice of economics. “So to pin that on the Affordable Care Act is, I think, a stretch.”

What the ACA actually has done is make the prices of drugs more visible to consumers — a point Bresch acknowledged on Mylan’s investor call.

“I think there has been a lot of discussion and some headlines around patients going from paying a copay to now paying the entire cost of a product… As employers shift more cost to employees and make that everything's got to come out of pocket before you hit your deductible is where you're seeing a lot of noise around EpiPen,” she said.

This isn’t Bresch’s first time under an unflattering spotlight. In 2007, the Pittsburgh Post-Gazette discovered that she had completed less than half the required coursework for an executive MBA degree at West Virginia University she claimed. An investigation the following year uncovered a $20 million gift to the school by Mylan’s then-chairman Milan Puskar five years earlier.

The resulting fallout led several administrators at the university — where Bresch did earn an undergraduate degree in international studies and political science — to resign, including president Mike Garrison, a former Mylan consultant and personal friend of Bresch’s father, Joe Manchin — a senator from and former governor of West Virginia.

Bresch’s family ties helped her get a foot in the door at Mylan, where she rose through the ranks. I got my first job at Mylan because of my dad,” she told WV Living magazine in a 2012 profile. “I couldn’t have told you what Mylan did. I vaguely knew it had something to do with science.”