Mylan Under Fire For Creative Accounting Of EpiPen Profits
The currents swirling around the steep price increases on Mylan NV’s (NASDAQ:MYL) lifesaving EpiPen drug just got a little deeper for the company’s embattled CEO. When the company’s chief executive Heather Bresch testified before a congressional committee last week, it was claimed that Mylan’s profit on a $608 two-pack of the injectors was just $100. During the hearing, Ms. Bresch also said Mylan’s average revenue per EpiPen has risen at 8 percent annually since 2014. That is significantly lower than the list-price hikes would indicate.
The committee members appeared skeptical about the claim. During the hearing, Rep. Jason Chaffetz (R-Utah), the committee chairman, said, “It just feels like you’re not being candid and honest with Congress.” Rep. Stephen Lynch (D.-Mass.) also expressed skepticism, saying, “The numbers don’t work, based on the documents you’ve given us.” Rep. Buddy Carter (R-Ga.), a pharmacist, pointedly reminded Ms. Bresch she was under oath. It now appears they were right to question the figure.
Mylan now says the $100 figure included taxes. The company applied the statutory U.S. tax rate of 37.5 percent to its calculation of EpiPen profits, substantially reducing the total it reported. The company called the inclusion of taxes standard for a product-line profitability analysis. The company sells about 4.1 million of the two-packs annually in the U.S.
Critics say that the company didn’t pay that much tax on the product. Mylan reportedly had a 7.4 percent overall tax rate last year, including a negative effective tax rate in the U.S., where the EpiPens were sold. Without the tax-related reduction, Mylan’s profits would be about $160 on the EpiPen two-pack. That is 60 percent higher than what the company told Congress.
Mylan acquired the rights to EpiPen in 2007 and has raised list prices 550 percent since then. The out-of-pocket costs have skyrocketed for some families and the price hikes have been sharply criticized. According to a poster that showed how various costs affected the profits the company earned from EpiPens, Mylan’s average revenue per two-pack was actually $274.
Mylan provided more detailed figures on its EpiPen profits to the House Government Oversight Committee early Monday morning, according to a statement by the company. The company says that the updated figures clarify that the numbers were after taxes. The company also said any lack of clarity wasn’t intentional.