What Mylan's CEO Will Tell Congress About the Price of EpiPen

After several hours of intense questioning, the congressional hearing on the rising price of EpiPens has finished.

Jason Chaffetz, the House Oversight Committee chairman, concluded the hearing by again questioning whether Mylan is gouging prices for an outrageous profit gain. CEO Heather Bresch repeated her claim that the company receives just $50 of profit on EpiPens, losing much of that to research and development costs.

Chaffetz, a Republican from Utah, seemed to be at his wit’s end, saying:

Don’t come here and tell us you’re doing the world a favor by increasing the price from $125 to over $600, and everyone else is making money except poor old Mylan. It just doesn’t smell right. It doesn’t pass the basic sniff test.

Chaffetz also challenged the FDA on how long it takes to approve a generic drug, concerned with the amount of time it will take before people have another option. Douglas Throckmorton, representing the FDA, did not know the exact time and said he would report back to Congress in 10 days.

Elijah Cummings, a Democrat from Maryland, had the last word of the hearing, telling Bresch:

In the end, our constituents still suffer. When you fly back on your jet, you’ll think about that mother I told you about trying to just take care of their families.

Mick Mulvaney, the Republican representative from South Carolina, placed the blame for EpiPen’s high prices on the fact that Mylan faces no competition—an issue he attributes to the difficulty of approving new products in the United States.

“The same exact product costs $150 in Europe … because it’s easier to get drugs approved in Europe, Mr. Throckmorton, than it is here,” Mulvaney said, addressing Doug Throckmorton, the FDA’s deputy director at the Center for Drug Evaluation and Research.

Public Citizen, a consumer-rights advocacy group, said Mylan’s EpiPen price is as much as three to nine times higher than it is in European countries. In the United Kingdom, for example, the EpiPen is priced at $69—far lower than the U.S.’s $609 price tag.

The difference in pricing, however, may have less to do with higher market competition and more to do with less federal regulation. As Sarah Kliff notes for Vox:

In Europe, Canada, and Australia, governments view the market for cures as essentially uncompetitive and set the price as part of a bureaucratic process, similar to how electricity or water are priced in regulated US utility markets. Other countries do this for drugs and medical care — but not other products, like phones or cars — because of something fundamentally unique about medication: If consumers can't afford the product, they could have worse odds of living. In some cases, they face quite certain odds of dying. So most governments have decided that keeping these products affordable is a good reason to introduce more government regulation.

Elijah Cummings, the Maryland representative who chairs the House oversight committee, compared Mylan’s actions to Turing and Valeant, two pharmaceutical companies that faced high-profile criticism for increasing the price of its drugs by 4,000 and 5,000 percent, respectively. Martin Shkreli, Turing’s former CEO who is commonly known as “Pharma Bro,” faced the House oversight committee in February for his role in increasing the price of a life-saving drug from $13.50 to $750.

“They used a simple, but corrupt, business model that other drug companies have repeatedly used—find an old, cheap drug that has virtually no competition and raise the price over and over and over again as high as you can,” Cummings said during the Wednesday hearing.

The cost of EpiPen stands at approximately $608 for a two-pack, a price that has increased by more than 500 percent since 2009. Heather Bresch, Mylan’s CEO, said the price does not reflect how much Mylan makes in revenue—a number Bresch put at approximately $274 per pack.

You can watch the hearing here:

So how much should EpiPen cost? A group called Four Thieves Vinegar Collective says it should be $30.

At issue here is the device that’s used to self-inject epinephrine, a drug that’s been available and used for about a century to treat anaphylaxis. Mylan makes that device in the form of the pen—hence EpiPen—and holds the patent on the injector's design.

Four Thieves Vinegar Collective  recently published on its website a guide to building a device similar to the EpiPen “using off-the-shelf parts, for just over $30.” The device, which the collective calls an EpiPencil, combines an auto-injector used by people with diabetes, and regular hypodermic needles. But, as MIT’s Technology Review points out “there is, of course, the small matter of sourcing the drug that puts the ‘epi’ in the EpiPencil—but that can be obtained under prescription or online from a chemical supplier.”

Four Thieves Vinegar acknowledges the invention violates Mylan’s copyright. “However if the choices presented to you are to die, because you cannot afford medication, or violate a copyright, which would you choose?” their FAQ page asks. “We believe it is a just act of civil disobedience to produce one’s own medications in violation of patent law.” Not to mention that it’s unregulated.

The Mylan CEO’s full testimony has been made public by the House Committee on Oversight and Government Reform. Here’s an excerpt:  

I know there is considerable concern and skepticism about the pricing of EpiPen AutoInjectors. I think many people incorrectly assume we make $600 off each EpiPen. This is simply not true. In the complicated world of pharmaceutical pricing there is something known as the Wholesale Acquisition Cost or WAC. The WAC for a 2 unit pack of EpiPen AutoInjectors is $608. After rebates and various fees, Mylan actually receives $274. Then you must subtract our cost of goods which is $69. This leaves a balance of $205. After subtracting all EpiPen Auto-Injector related costs our profit is $100, or approximately $50 per pen.

The pharmaceutical giant hasn’t been quiet amid the criticism directed against it.

As my colleague Adam Chandler reported August 29 the company announced it would release a generic version of it at about half the price of the original. Here’s more:

The rollout of a generic, which will take several weeks, is the latest maneuver in an ongoing public-relations episode that has included a controversial issuing of coupons for certain patients and a discursive set of explanations and apologies. Even as a generic would relieve the financial burden on insurers and taxpayers, its price is still $200 more than the list price for the EpiPen was in 2008. Mylan maintains that the price increases were due in part to product improvements and efforts to make EpiPens more widely available; however, critics—who would have rather seen Mylan simply reduce the cost of EpiPens—have noted that annual compensation for Bresch also rocketed in the past eight years from $2.5 million to nearly $19 million in 2015.

Bresch, the CEO, has previously said she is “frustrated” about the controversy, but she also told The New York Times:  “I am running a business.” Indeed, as my colleague Olga Khazan noted on August 24, while the “EpiPen story may seem shocking, … it fits a pattern.”

Prescription drug pricesare rising across the board. And for various reasons, many medicines are more expensive in the U.S. than they are elsewhere. (In France, EpiPens are sold by a different company, and they cost about $85 a pair.)

Even though EpiPen prices have been going up for years, many customers are only now noticing, as USA Today points out. Partly that’s because it’s back-to-school season, so parents are stocking up. But also, the price increase was gradual, and many insurance plans might have been picking up much of the cost.

Mylan bought EpiPen from Merck in 2007. That’s when the price of the drug began to rise. A two-pack of EpiPen, which cost $94 in January 2007, cost $609 in May 2016—a nearly 550 percent increase. Those numbers come from the Kaiser Family Foundation’s analysis of how much Medicare spent on the drug. That number, released Tuesday, is staggering.

According to our analysis, total Medicare Part D spending for the EpiPen increased from $7.0 million in 2007 to $87.9 million in 2014, an increase of 1151%

It’s probably worth noting that Heather Bresch is the daughter of Joe Manchin, the Democratic U.S. senator from West Virginia (and the state’s former governor), and Gayle Manchin. A story this week in USA Today detailed actions by Gayle Manchin in 2012 after she became the head of the National Association of State Boards of Education.

Here’s more from the newspaper:

[S]he spearheaded an unprecedented effort that encouraged states to require schools to purchase medical devices that fight life-threatening allergic reactions.

The association’s move helped pave the way for Mylan Specialty, maker of EpiPens, to develop a near monopoly in school nurses’ offices. Eleven states drafted laws requiring epinephrine auto-injectors. Nearly every other state recommended schools stock them after what the White House called the "EpiPen Law" in 2013 gave funding preference to those that did. …

Manchin was appointed in 2007 to serve a nine-year term on the West Virginia board of education by her husband, then-Gov. and now Sen. Joe Manchin, D-W.Va. Gayle Manchin became the association president in January 2012, the same month her daughter became Mylan’s CEO.

The revelation has prompted Patrick Morrisey, West Virginia’s attorney general, to ask a court to enforce a subpoena against Mylan as part of his investigation into EpiPen’s price.