Lawmakers Blast Mylan in Congressional Hearing Over EpiPen Price Increases

Both Republicans and Democrats questioned reasons given by CEO for the hikes

Lawmakers Blast Mylan in Congressional Hearing Over EpiPen Price Increases
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September 22, 2016

Lawmakers on both sides of the aisle intensely questioned and chastised Heather Bresch, CEO of EpiPen manufacturer Mylan, in a hearing on Wednesday regarding the company's drastic price increase of the emergency medical device over the past nine years.

Reuters reports that Bresch testified in front of the House Committee on Oversight and Government Reform. The hearing was called due to outrage among the public and lawmakers alike regarding the price hikes, which some regard as instances of price gouging.

Legislators Take the Offensive

The lawmakers took turns repudiating the hikes, describing them alternatively as "sickening," "disgusting," and indicative of "blatant disrespect" by Mylan for patients unable to afford the life-saving device for children with severe allergies.

They interrupted Bresch several times as she attempted to explain how the pharmaceutical industry in the U.S. prices products, including how other members of the supply chain--such as health insurers--take a certain percentage of the profits reaped from sales of those products.

The lawmakers pointed out how both the EpiPen's profits and Bresch's salary grew over the nine years in question. Bresch's salary increased from approximately $2.5 million to more than $18 million during that time.

They also blamed the Food and Drug Administration (FDA) for not moving more quickly in allowing competitor products to get to the market.

U.S. Representative Elijah Cummings commented that the company "jacked up" the price of the device in order "to get filthy rich at the expense of our constituents." He also expressed doubts about whether or not Mylan would change its ways after the backlash dies down.

"After Mylan takes our punches they'll fly back to their mansions in their private jets and laugh all the way to the bank," he said.

The New York Times (NYT) reports that, when Representative Bonnie Watson asked Bresch for confirmation that she had flown to Washington, D.C. for the hearing on the company's private jet, Bresch responded, "I did." Bloomberg reports that Bresch took more than $310,000 worth of rides on the jet last year.

Bresch Fights Back

Bresch defended the price increases, however. According to Reuters, she claimed that Mylan only earns about $100 for one pair of EpiPens after rebates, marketing costs, and other expenses are taken into account. She also noted that Mylan is planning to issue a generic version of the device for around $300, roughly half the price of the branded version and that the company provides the devices for free to numerous schools. Bresch also stated that the generic medicines produced by Mylan, if combined, could have saved $180 billion in costs for the U.S. healthcare system over a decade.

However, NYT notes that Bresch seemed to be trying to shift blame rather than take responsibility. Although she stated in her opening remarks that "[p]rice and access exist in a balance, and we believe we have struck that balance," the lawmakers were skeptical over the accuracy of her figures and said that her answers regarding the company's financial details were inadequate.

Consumerist reports that Oversight Committee Chairman Representative Jason Chaffetz was particularly skeptical in this regard.

"I find that a little hard to believe," he said regarding Bresch's claim about how much Mylan earns per pair of EpiPens. "When the juice [the epinephrine in the device] is a dollar and you're selling it for $600, there's some room for profit."

He also pointed out that five executives at the company—whose revenue from the EpiPen makes up about 10 percent of its total revenue—earned $300 million over the past five years, a figure that "doesn't add up for a lot of people."

Additional Practices in Question

Lawmakers also questioned the company's marketing plan—which cost $100 million last year despite almost no competition for the EpiPen—as well as its reasons for the recent changes in its discounting programs and its plans in launching a generic device. Rep. Chaffetz was particularly passionate regarding the latter.

"Suddenly, feeling the heat, feeling the pressure, Mylan offers a generic version at half the price. What happened to the other $300?" he asked.

He also pointed out that the company is planning to sell the generic directly rather than through other parties that would split the profits. He and Bresch then engaged in a heated back-and-forth exchange over the amount that Mylan would actually make in profits from the direct-to-patient sales of the generic.

Rep. Chaffetz contended that if the company makes $300 from the sales, it could actually make more for a pair of generic devices that it does from the branded version. Bresch responded that Mylan is expecting to make roughly $200 per pair. She then confirmed that the generic version would be identical to the EpiPen in every way except the name, which raised the question of why the company will charge more for the branded version if the only thing differentiating it from the generic it is the name.

Bresch stated that Mylan's move to release a generic voluntarily was "unprecedented." Rep. Chaffetz responded, "It's unprecedented to raise the price 500 percent."

Rep. Cummings was equally dismissive of the company's discounting programs.

"[W]e've heard that one before," he said. "This is the same PR playbook other companies use. Just say you're expanding your patient assistance programs… talk about discounts and coupons and rebates," but the drug manufacturers "never ever, ever lowered the prices."

Mylan Under Investigation

Mylan is in hot legal water in other places besides Capitol Hill. A woman in Ohio has sued the company over the price hikes, alleging that they violate the Ohio Consumer Sales Practices Act. In addition, the New York Attorney General is investigating the company for potential antitrust violations, alleging that Mylan may have acted to prevent competition from competitor devices in schools by inserting anticompetitive terms into sales contracts with several local school systems. This would force any school that wanted to purchase an emergency epinephrine injector for its students to buy Mylan's device rather than a product from another company.

"No child's life should be put at risk because a parent, school, or healthcare provider cannot afford a simple, life-saving device because of a drug-maker's anti-competitive practices," Attorney General Eric T. Schneiderman said.

"If Mylan engaged in anti-competitive business practices, or violated antitrust laws with the intent and effect of limiting lower cost competition, we will hold them accountable. Allergy sufferers have enough concerns to worry about—the availability of life-saving medical treatment should not be one of them. I will bring the full resources of my office to this critical investigation."

Where's the Regulation?

Although the intense outrage over the price hikes forced Mylan to make the concessions of releasing a generic and expanding its discount programs, it did not give the government authority to regulate drug prices.

As Consumer Reports notes, "[N]o government body—including the Federal Trade Commission (FTC), the Food and Drug Administration, and the Centers for Medicare & Medicaid Services—has rules or laws that dictate or restrict the price a pharmaceutical company can set for a drug. And in most cases, there's nothing that restricts how much a company can raise that price."