When Mylan CEO Heather Bresch testified before the House Committee on Oversight and Government Reform on September 21, her estimate that each twin pack of EpiPens nets the company only $100 of its $600 list price got a skeptical response: "It just doesn't smell right," said Rep. Jason Chaffetz, the committee chair.
Now, Chaffetz and his colleagues in the House are demanding that Mylan hand over reams of evidence by October 7 to support Bresch’s contention that the anti-allergy injection is not really much of a money-maker for the company.
It won’t be an easy task. In the days following the hearing, a securities filing from Mylan revealed that Bresch had been factoring in a 37.5% tax rate to her estimate, which was actually 5 times higher than what the company had paid overall. Before taxes, the profits from EpiPen were $166 per package.
Now, the House is demanding 18 sets of documents to “help us understand the manner by which Mylan prepared and provided information to the Committee and the pricing of EpiPen,” according to a letter addressed to Bresch. They include all documents on Mylan’s tax rate, a list of its profits and expenses from EpiPen dating back to 2007, and all the agreements related to the product that the company has struck with pharmacy benefits managers, wholesalers, distributors and other partners.
The scrutiny comes in the wake of a Wall Street Journal report revealing that the company slashed its estimate of EpiPen profits by applying a blanket corporate tax rate of 37.5% to them when, in fact, the company’s overall tax rate was 7.4% last year. The company said in a statement that such accounting of profits on a single product was “standard.”
The letter from the House committee notes that Bresch referred to a table during her testimony that suggested EpiPen’s profits were negatively affected by rebates, cost of goods sold and other expenditures. “The graphic made no mention of taxes or tax assumptions made by Mylan to estimate the $100 profit number,” the letter states. “Neither did your written testimony.”
In response to the new request for documents, a Mylan spokeswoman told the WSJ, “We remain committed to productive and continued cooperation with the Committee, and we intend to respond to their request for additional information.”
Meanwhile, Mylan has big expectations for EpiPen this year. According to the SEC filing, it expects operating profits to jump from $498 million last year to $671 million, and operating margins on the product to jump from 72% to 75%.
As for its tax rate, Mylan got a major break when it moved its headquarters from the U.S. to the Netherlands. In fact, Chaffetz points out in the letter from the House, the only mention Bresch made of taxes during the hearing was to disclose that the overseas move would result in a company-wide effective tax rate of 15% to 17%.
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