Mylan CEO Bresch used a sky-high tax rate to lowball EpiPen profits by 66%

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Mylan CEO Heather Bresch quoted one number that got a lot of attention last week on Capitol Hill: EpiPen profits weren’t all that large, just $100 for each package of two pens, on a list price of more than $600.

Thing is, that number was misleading.

In a securities filing Monday, Mylan posted a chart detailing the EpiPen numbers. The profits figure Bresch gave during the congressional committee hearing included a 37.5% tax rate--and that understated the product’s profits by $187 million.

Before taxes, EpiPen profits came in at $498 million--or $166 per package. Almost two-thirds higher than Bresch had said.

And not only did Bresch fail to specify that she’d deducted taxes from that profits figure, but that tax rate was 5 times higher than what Mylan paid last year, thanks to a tax inversion deal that moved its domicile from the U.S. to the Netherlands.

Mylan, however, contended in a Monday statement that deducting taxes is standard procedure for product accounting, and that it chose not to use a “blended global tax rate,” which amounted to 7.4% for Mylan in 2015.

"Just as we did not use a blended global tax rate, we also did not allocate corporate expenses associated with running the business, which would have further reduced its profitability," the company said. "We believe it is most appropriate, and conservative, to focus entirely on EpiPen Auto-Injector specific costs and associated taxes.”

Not so much, SSR Research analyst Ryan Baum told the Wall Street Journal, which broke the story. Using a 37.5% tax rate “has nothing to do with reality,” Baum told the WSJ, going on to say, “That implies this notional [$100] profit figure also has nothing to do with reality.”

Rep. Jason Chaffetz, chairman of the House Committee on Oversight and Government Reform, suggested as much during last week’s hearing.

"It just doesn't smell right," Chaffetz said. "It doesn't pass the basic sniff test.”

As the WSJ pointed out on Monday, Bresch brought a poster to the hearing that purported to detail EpiPen’s costs, and it made no mention of taxes--nor did Bresch mention taxes when Chaffetz questioned her about the specific costs.

"When the juice [the epinephrine in the autoinjector] is a dollar, and you're selling it for $600, there's some room for profit,” he said.

The committee demanded internal documents last week that would show just how much, exactly, Mylan profits off of EpiPen. The deadline for those documents--originally requested last month, said Rep. Elijah Cummings, the committee’s ranking member--is Friday.

"We didn't believe Mylan's numbers last week during their CEO's testimony, and we don't believe them this week either, which is why we gave them 10 days from the date of our hearing to produce their internal files," Cummings said in a Monday statement.

For 2016, Mylan has forecast larger profits and a bigger operating margin for EpiPen. According to the chart Mylan filed, It’s looking for $671 million in operating profits, up from last year’s $498 million. And it expects operating margins to be 75% for the product, compared with 72% in 2015.