Mylan’s Price Hike on EpiPens

Heather Bresch Daughter of Joe Manchin, a prominent politician throughout her childhood.

Used her father's connections to help land a job at Mylan, a generic drugs company (1992). Started off as a sales clerk and worked her way to promotions. Heather began to learn the business inside and out. Was named President, COO, CIO of Mylan during her time.

Was announced CEO of Mylan in 2011.

Heather Bresch

When she became CEO shortly after the acquisition,

▫ Bresch focused on marketing EpiPens, turning a $200 million business into a $1.1 billion business

▫ The EpiPen became Mylan’s most important product, accounting for $1 billion of its $9.4 billion in sales in 2015.

5 Year Stock Price

Financials: 2014 vs. 2015

Gross Profit: 4,216,100Operating Income: 1,460,900 Net Income: 847,600

*In billions

Gross Profit: 3,528,000Operating Income: 1,352,600 Net Income: 929,400

Income Statement

Epipen Price

Drug CEO Salaries

Epipen: Heather Bresch - 18.9 millionREGN: Leonard Schleifer - 47.5 millionVRTX: Jeffrey Leiden - 28 millionJohnson & Johnson: Alex Gorsky - 23.8 million

http://www.cbsnews.com/news/whats-behind-the-sharp-rise-in-prescription-drug-prices/

EpiPen costs in other countries

Britain: $69France: $100Germany: $200U.S: $600

Other Drug Companies▫ Reuters analysis says that

the 10 most popular drugs add billions to U.S. health care spending

▫ Conditions include arthritis, asthma, abnormal cholesterol, crohn's disease

EpiPen vs. Other DrugsAnti-Malaria drug, Daraprim, 5,000% increase

$13.50 to $750Used to treat parasitic infections and prevent a nervous system infection in those with HIV.Will not allow a generic version of the drugCan do this because of loophole ‘closed distribution model’

http://www.cbsnews.com/news/whats-behind-the-sharp-rise-in-prescription-drug-prices/

Blame on intermediaries including wholesalers, retailers and pharmacy benefit managers

"That $608 is a list price. What Mylan takes from that, our net sales is $274.”

The CEO’s Justifications for Price Hikes

Mylan has costs that include "manufacturing the product, distributing the product, enhancing the product, investing."

“No one's more frustrated

than me.

CEO Heather Bresch to CNBC

High-deductible health plans High copaymentsOut-of-pocket costs for prescription medications

http://www.npr.org/sections/health-shots/2016/12/16/505851637/mylan-to-sell-generic-epipen-at-half-the-price-of-originalhttp://www.cnbc.com/2016/08/25/mylan-expands-epipen-cost-cutting-programs-after-charges-of-price-gouging.html

Blame on the Health-Care System

Doubling eligibility for its patient assistance program

Pathway to order Epi-Pens directly from the company

Cut their generic to half the price of a regular epi-pen

Mylan’s Actions Towards Cost-Cutting

“This isn’t a discount. It’s

a PR move.

Sen. Bernie Sanders

Allergy Statistics

In 2014, 4 million U.S children had food allergies

▫ Almost 40% of these children have severe, life threatening reactions

10% of people are allergic to penicillin

5% have insect allergies

40 U.S. deaths/year

Individuals, schools, government offices are all suppose to carry multiple EpiPens.

http://www.aafa.org/page/allergy-facts.aspx

people are at risk from anaphylaxis, or the severe, life-threatening allergic reaction that EpiPen's injection of epinephrine is designed to counteract.http://www.cnbc.com/2016/08/25/mylan-expands-epipen-cost-cutting-programs-after-charges-of-price-gouging.html

43 Million

Legal Issues

Antitrust Laws

Do these laws apply to Mylan?

See:http://www.cbsnews.com/news/whats-behind-the-sharp-rise-in-prescription-drug-prices/ https://www.wsgr.com/publications/PDFSearch/law360-0915.pdfhttp://www.cnbc.com/2016/08/23/us-lawmakers-press-mylan-on-epipen-price-increases.html

Mylan’s Contracts with Schools

http://gizmodo.com/do-mylans-epipen-contracts-with-schools-break-antitrust-1786263484

There have been questions whether Mylan broke antitrust laws with their contracts with schools.

Allegations that they had contracts with schools that they could not buy products from their competitors (before price was raised).

CEO Testifying

Refused to admit at any point that her company raised the price of the EpiPen to make more money

Didn’t answer any questions of revenue she was asked to obtain ahead of time

Congress Didn’t Buy It.

Rep. Elijah Cummings acused the company of using a "simple but corrupt business model" to enrich themselves in the same manner as Martin Shkreli of Turing Pharmaceuticals and executives at Valeant Pharmaceuticals.http://www.businessinsider.com/mylan-ceo-heather-bresch-house-oversight-committee-hearing-epipen-2016-9

Pending Trials

Several proposed class-action cases against drugmaker Mylan involving EpiPens have been brought in federal courts.

http://www.usatoday.com/story/money/business/2016/12/30/lawsuits-against-epipen-maker-mylan-moving-forward/95995348/

What about Daraprim?

It seems that Daraprim has acted alone in their price increase.

There have not been any proven evidence that they were working with anyone in the market when they spiked their price.

Turing and the Closed Distribution Model

Open Distribution Model: “The allowance of the same types of items to be carried and distributed in a certain

area or region by different sellers.”

Unclear IntentionsStealing market share?Kaleo Pharmaceuticals & the Auvi-Q epinephrine auto-injector

Teva Pharmaceuticals & its own generic EpiPen

http://www.npr.org/sections/health-shots/2016/12/16/505851637/mylan-to-sell-generic-epipen-at-half-the-price-of-original

Looking to the Future

Mylan’s Mission & Vision

http://www.mylan.com/en/company/about-us

Possible Impact of the Trump Administration

Donald Trump’s New Promise: I Will ‘Bring Down Drug Prices’

Trump looking to do something about drug companies (populist appeal)

http://www.forbes.com/sites/patrickcox/2016/12/14/trumps-fda-chief-may-implement-progressive-approval-for-drugs/#431eb7c11c34

The Future of the FDA

Potential FDA chief appointee: Jim O’Neill

O’Neill has publicly supported a “progressive approval” process for drugs

http://www.forbes.com/sites/patrickcox/2016/12/14/trumps-fda-chief-may-implement-progressive-approval-for-drugs/#431eb7c11c34

GoverningIssues

The FDAPatentsCozy insurance relationships

Other Companies that May Follow Suit

Bayer AGJohnson & Johnson

Pfizer

Final Thoughts to Consider

Final Thoughts to Consider

““It's a kind of pay-or-die pricing system for the EpiPen. Parents are really frantic about how they're going to

pay for this.” Ralph Nader

“The cost of epinephrine is literally less than a Big Mac.”

Mark Baum, Pharmaceutical CEO developing an alternative