Mylan CEO Heather Bresch will tell congressional critics Wednesday that she “never expected” to face questions about EpiPen prices, according to prepared remarks released by the House Committee on Oversight and Government Reform.
Bresch is set to show up on Capitol Hill for a grilling before the committee, and her up-front statement shows that she intends to offer the same arguments that Mylan has trotted out since the beginning of the pricing controversy back in August. The company’s price hikes--which amount to more than 400% since 2009, and a tenfold increase since Mylan bought the marketing rights from Merck & Co. in 2007--were necessary to fund the tweaks it made to the product, lobbying for widespread adoption to help treat anaphylaxis emergencies in schools and public places, and boosting awareness through marketing and advertising, Bresch’s testimony says.
The company has invested more than $1 billion in those efforts, Bresch will say. And, as she’s repeatedly maintained, she’ll contend that the real problem with EpiPen is not its price, but payers’ shifting costs to patients--coverage changes that brought to light the Mylan’s enormous price hikes.
But Bresch won’t be able to stop with her own statement. Mylan’s newly announced patient assistance programs and brand-new EpiPen generic, as well as Mylan’s explanations for the price hikes, have mostly fallen flat with politicians who’ve assaulted Bresch and her team amid the EpiPen furor. Several congressional committees are investigating, and federal agencies face calls for their own probes.
So, as Wells Fargo analyst David Maris pointed out in an investor note Tuesday evening, the CEO will face a long list of difficult questions. One of them could well be a query why, despite the spending Bresch cites, Mylan’s margins in its specialty division, mostly made up of EpiPen sales, increased to 60% last year from about 35% in 2012. Over the same period, the product’s price went up 153%.
Maris expects the committee to ask who made the decision to raise EpiPen’s prices, and whether Bresch and Mylan Chairman Robert Coury were personally involved.
The CEO is likely to face questions about her own compensation, which amounted to $18 million last year--and more than $25 million in 2014--outranking many packages handed out to top execs at drugmakers much larger than Mylan. The company’s selection of 22 “peers” for executive pay reference figures include some of the biggest companies in the business--AbbVie, Eli Lilly, Bristol-Myers Squibb--and only three companies that predominantly deal in generics.
A key question, as Maris notes: Did EpiPen’s growth and profitability contribute to the earnings growth and other figures used to evaluate executive performance--and thus pay? As the company disclosed in year-end earnings statements, “[F]avorable pricing” was an element to EpiPen’s sales growth in 2015.
In this or future hearings, Bresch and Mylan will likely need to defend their case for EpiPen price hikes by coughing up specifics, the Wells Fargo analysts say. Did Mylan make more money on EpiPen as prices rose, or did rebates to payers and deals with distributors--one of the company’s defenses against the criticism--soak up the difference? If not, then how much did Mylan glean from the price hikes?
And then there’s this: Mylan knew that EpiPen costs were shifting to patients. Why didn’t it increase patient assistance and roll out a cheaper generic before the outcry?
Plus, a new report from the Kaiser Family Foundation could prompt separate questions. KFF found that between 2007 and 2014, Medicare Part D spending on EpiPen soared upward by more than 1,000%, mostly “driven by a five-fold increase in average Medicare per-prescription spending on the EpiPen, up from $71 in 2007 to $344 in 2014.” As the foundation notes, the spending leap demonstrates that EpiPen price hikes have been taking a toll on taxpayers and government programs, separate from its impact on payers and insurance companies.
As for that $1 billion in EpiPen investment over the past several years, how much of it amounts to marketing spend--including hundreds of millions in consumer advertising, between anaphylaxis awareness campaigns and branded ads. In a recent letter to Sen. Charles Grassley, Mylan cited $98 million in ad spend for the product and awareness campaigns last year, and another $43 million so far in 2016.
The letter sets out some other dollar figures; it says Mylan spent $143 million on its copay discount card over the last 5 years and cites $80 million in spending on 700,000 free EpiPens for schools, a program that began in 2012. That would be about $24 million annually, on average, for copay assistance and perhaps $20 million, on average, on EpiPens for schools--much less than its ad spend.
And as a Mylan exec said during the company’s Q2 earnings call: “I want to stress that we continue to invest in expanding the size of the overall market by increasing awareness and access,” Chief Commercial Officer Anthony Mauro said.
Also at today’s hearing, Dr. Doug Throckmorton, FDA Deputy Director, Center for Drug Evaluation and Research, will testify about the potential EpiPen competitors that have been rejected by the agency, including a generic from Teva Pharmaceutical that failed to win approval earlier this year--the generic that Mylan protested in a citizen petition. Lawmakers have suggested that the FDA push alternatives to market to increase competition to Mylan’s monopoly product.
At today’s hearing, the committee plans “to examine ways to encourage greater competition in the EpiPen market and to speed FDA’s approval of acceptable new generic applications,” Chairman Jason Chaffetz and Ranking Member Elijah Cummings said in a joint statement last week. “Our goal is to work together to ensure that critical medications, like the EpiPen, are accessible and affordable for all of our constituents.”
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