Mylan defends stratospheric EpiPen price

Heather Bresch, the Chief Executive Officer of drug manufacturer Mylan (NASDAQ: MYL), defended her company’s six fold increase in price of EpiPen allergy reaction injector in Congress. She told lawmakers the company made much less profit from the treatment than it is popularly estimated.

The CEO of Mylan came under heavy fire from both Democrats and Republicans. Lawmakers from both the parties assailed her over the dramatic price increase from $100 for a pair in 2009 to a staggering $608 today. Representative Elijah Cummings, a Democrat, said that the pharmaceutical major raised prices to make massive profits at the expense of the common citizen.

Bresch, however, was firm in her stand during the House Oversight Committee Hearing. She did not apologize to lawmakers for the treatment’s high price. She told the gathering that there is clearly a misconception when it comes to the treatment’s profitability. The CEO pointed out that the EpiPen is stocked by many educational institutions and also by individuals all over the United States-and the medicine needs regular replacement when that particular unit expires. She stated that she understood there was considerable skepticism and concern about pricing and added that many people mistakenly assume that the company profits $600 from selling a unit of EpiPen. She forcefully said that this assumption is erroneous.

Bresch explained the massive price rise by saying that Mylan receives only $274 for every two pack post the deduction of fees and rebates. She said when the cost of goods and other accessory costs are taken into account, the company makes only $100 as profit for every two pack. 

Mylan is not the only company to face political scrutiny concerning steep price increases. The list of companies following identical strategy includes Turing Pharmaceuticals and Valeant Pharmaceuticals. The CEO of the former, Martin Shkreli, termed this same committee as “imbeciles” after he attended the same event earlier in 2016. Members of the Congress have also queried the pay package of senior officials of the drug giants. Bresch draws an annual pay package of $18 million.

According to Marianne Udow-Phillips of Center for Healthcare Research and Partition, University of Michigan, the profit margin enjoyed by Mylan from EpiPen will fluctuate as per the payer. She added that considering the sales volume, Mylan makes a huge amount of profit from the product. To explain her rationale, Udow-Phillips said that even for taking the amount of $50 as profit per EpiPen, it is a large profit margin as the drug costs only $1 and the device was invented much before Mylan made the technology.

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