PhotoMylan CEO Heather Bresch spent an uncomfortable day this week before a House committee investigating her company's pricing policy for the EpiPen, a life-saving antidote to allergic shock.

Mylan recently raised the price of a two-pack of the product to $600. When it purchased the rights to the drug nine years ago, it cost an inflation-adjusted $109.

In her testimony before the House Committee on Government Oversight and Reform, Bresch said her company had taken steps to soften the impact of the price hike on low income consumers, but made clear the company would not reduce the price, as many critics called on it to do.

One of those critics is the consumer group Public Citizen, which monitored Bresch's testimony and issued a point-by-point rebuttal. When the CEO defended the price of the EpiPen as necessary to fund research on other drugs, Public Citizen wasn't buying it.

“Bresch conflates research and development and the cost of manufacturing,” the group said in its analysis. “Manufacturing costs do not reflect product improvements, and cannot answer the criticism that Mylan has spiked the price of an old product without making substantial improvements to it. Mylan makes as much profit off EpiPen alone every year as the company claims to invest across all product lines in R&D plus manufacturing.”

Wholesale Acquisition Cost

During her testimony, Bresch blamed the way drugs are priced in the U.S., citing the Wholesale Acquisition Cost or WAC.

“The WAC for a 2 unit pack of EpiPen AutoInjectors is $608, Bresch noted. “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.”

Public Citizen responds that Bresch really didn't make her case. It said even if the EpiPen profit were as low as $100, that amount would still be a large profit from a device with such a low manufacturing cost, “any development costs of which were recouped many years ago, containing a century-old drug.”

Did anything get settled?

USA Today observes that the sparring this week really didn't resolve anything, and that may be part of a strategy. It notes that CEOs who incur the wrath of lawmakers dutifully trudge to Capitol Hill to endure a verbal lambasting. Then they leave and nothing changes.

It prompted committee member Rep. Elijah Cummings (D-MD) to compare the strategy to Muhammad Ali's famous rope-a-dope in the boxing ring. Ali would often cover his face and lean against the ropes to absorb his opponents blows, patiently waiting until his opponent spent all his energy.  

Share your Comments