Heather Bresch, CEO of EpiPen producer Mylan, testified in front of the House Oversight and Government Reform Committee about the drug’s price increase on Wednesday.
The basic rundown of the EpiPen situation is that since 2007 when Mylan acquired patent rights for the device used to treat life-threatening allergic reactions, its price has increased by more than 500%. A two-pack of pens currently has a list price of 608$. Doug Throckmorton, deputy director of the FDA was asked to testify alongside Bresch as there is legitimate concern that lack of a competitor product on the market has allowed Mylan to inflate prices with commercial impunity.
Her prepared testimony released ahead of the hearing gave background on Mylan as a company and addressed some of the key points of the controversy. Congress, however, wasn’t impressed by her answers.
“Looking back, I wish we had better anticipated the magnitude and acceleration of the rising financial issues for a growing minority of patients who may have ended up paying the full [list] price or more,” her testimony reads. “We never intended this.”
The members of Congress had a lot of questions for Bresch, who testified alongside Doug Throckmorton, a deputy director of the Food and Drug Administration. In her defense, she said the company is implementing a number of programs to help patients pay for EpiPens.
Here's the TL;DR version of what went down.
- Bresch didn’t admit that the company raised EpiPens’ price to increase profits. She failed to present data pertaining to financial and patient assistance programs that Congress requested beforehand. She was unable to provide the info off the top of her head, either. She also said there were no plans to further increase prices in 2017, but didn’t give a definitive ‘no’.
- Mylan’s EpiPen4Schools program also took a lot of flak — Rep. Tammy Duckworth called it a “monopoly” as schools that enrolled in the program had to sign a noncompete agreement. She was also outraged that most schools didn’t know the president of the National Association of the State Boards of Education, who was lobbying for them to join the program, was Bersch’s mother.
- Congress also criticized Throckmorton as it felt the FDA’s convoluted approval process allowed this situation to arise. Throckmorton said FDA regulation prevented him from disclosing all the information the representatives requested about any applications for competitor products
- By the end of the hearing, Bresch faced questions about Mylan’s tax inversions, private jets, and Rep. Earl Carter’s anger over Mylan’s generic version of the EpiPen.
Still here? Ok. Let’s go through the painful (for Bresch) step-by-step of the hearing.
It doesn’t make sense and we don’t believe you
“We’ve got a lot of questions,” said Rep. Jason Chaffetz, chairman of the committee, at the start of the hearing.
Chaffetz went on to ask how much money Mylan makes off each EpiPen and how much of that money goes towards its executives. He also pointed out that there’s an appalling lack of competition, which allowed for the price to skyrocket. And when there are lives on the line, “parents don’t have a choice,” he added.
Rep. Elijah Cummings followed Chaffetz, saying he was “not impressed” by Bresch’s prepared testimony. He accused the company of using a “simple but corrupt business model” to cash in big, comparing them to Martin Shkreli of Turing Pharmaceuticals and the execs of Valeant Pharmaceuticals. He also put little faith in Mylan’s pledge to increase patient assistance programs. He referenced Shkreli’s testimony earlier this year, saying he “took his punches” then went back and kept on doing the same thing.
“We’ve heard that one before,” he said. “They never ever lower their prices.”
“I’m concerned this is a rope-a-dope strategy. It’s time for Congress to act.”
Bresch and Throckmorton both gave their prepared statements, which can be read here. Basically, it’s Bresch defending herself and Mylan while Throckmorton details how the FDA is putting effort into ramping up the approval of generics — exactly what you’d expect from a prepared speech.
The Q&A, however, was much more interesting.
Chaffetz asked what the company believed was going to happen when they raised the drug’s price. Bresch tried to explain that Mylan doesn’t actually make a lot of money on the drug.
“This doesn’t make any sense,” he said. “This is why we don’t believe you.”
He asked Throckmorton how many epinephrine products were in the FDA’s que right now, but to Chaffetz’s visible frustration he couldn’t answer the question. When pressed, Throckmorton said he wasn’t allowed to disclose “confidential commercial information” in that setting. Later, the FDA tweeted:
FDA’s practice is not to disclose the number of pending applications since together w/ public info it could disclose applicant identity.
— U.S. FDA (@US_FDA) September 21, 2016
Another issue Chaffetz brought up was Bresch’s mother’s involvement in the issue. A USA Today article reported that she had used her influence as president of the National Association of State Boards of Education to support Mylan’s EpiPen4schools program. Bersch said the story distorted facts and basically shamed Mylan for giving schools free EpiPens.
Rep. Cummings wanted to calculate how much the company spends on marketing compared to what it rakes in. So he asked how much profit the company made off the sale of EpiPens in 2015. He was going by publicly available information but wanted the hard facts from the CEO. In the end, though, he had to figure it out without Bresch’s answers.
“You’re telling me you don’t know how much you spent on patient assistance programs and school-related programs in 2015?” he asked.
She replied they spent ‘maybe’ 105$ per pack because they had to raise awareness about anaphylaxis. Cummings then asked how much money was pooled into R&D in 2015 — he had to ask twice and went v-e-r-y slowly the second time. Again, Bresch came up short on answers.
“You knew what this hearing was about. I’m asking questions that if you’re the CEO I think that you would know,” he said.
Later, he asked if Bresch agreed that Mylan made hundreds of millions of dollars on EpiPen in 2015 alone, to which she replied that the pens weren’t all of the company’s $11 billion revenue. Cummings asked her again, to which she answered ‘yes’. She was then asked to produce documents showing the revenue on EpiPen (this were requested before the hearing but Bresch didn’t bring them along.)
Rep. Eleanor Norton then asked the question on everyone’s lips: will the price of EpiPen come down? The CEO replied that an authorized generic was the fastest way to make this happen — and, even if the branded product’s price went down, it wouldn’t necessarily make a difference on shelf price.
“What have you done to earn this 671% [compensation] increase?” Norton followed-up.
Bresch first tried to dodge the question by saying Mylan products have saved $180 billion in US expenses. Pressed by Norton, she pointed to the EpiPens Mylan has supplied to schools and in public places. Rep. Stephen Lynch asked how much the company made off of each pen, and Bresch tried to show using poster boards that the company got 235$ from each two-pack for a profit of about 50$. She added that the 300$ generic would make even less than 50$ profit for Mylan. Bresch later told Rep. Scott DesJarlais that she did not plan on increasing the price of the EpiPen in 2017. DesJarlais then asked if she thinks 600$ is too much to charge for the pens.
“We believe it was a fair price, and we’ve just now lowered that by half,” Bresch said.
But if the price was fair, why lower it at all, he asked Bresch. She replied it all came down to people paying closer to the list price, which wasn’t intended.
A mother’s touch
Duckworth raised concerns with the EpiPen4Schools program — to take part, the schools had to agree not to buy it from anyone else. Bresch replied that the schools are free not to join the program if they so wish.
“That, to me, is an unfair monopoly,” Duckworth said. “That’s right, they don’t have to buy them, but your own mother is out there […] passing out your guides for Mylan.”
She added that most schools had no idea the person lobbying for the program was connected to the CEO. Rep. Mick Mulvaney discussed government intervention in the project. He said that Congress talked about an industry it didn’t fully understand — but he made it clear that Bresch and Mylan won’t get off easily.
“I’ll tell you what we do know, though, is that you’ve been in our hallways to ask us to make people buy your stuff,” he said, citing that 11 states have laws requiring EpiPens be available in schools. “You’ve lobbied us to make the taxpayer buy your stuff. […] I was here when we did it.”
“You came and you asked the government to get in your business, so here we are today. And I was as uncomfortable with some of these questions as you were […] but I have to defend both my Republican and Democrat colleagues for these questions because you’ve asked for it, so I guess this is my message. If you want to come to Washington, if you want to come to the state capitol and lobby us to make us buy your stuff, this is what you get. You get a level of scrutiny and a level of treatment that would ordinarily curl my hair, but you asked for it!”
Rep. Earl Carter discussed the issue of pharmacy benefits managers, companies that serve as middlemen in negotiating the price of drugs. He’s been investigating this type of companies as he believes they’re part of the reason why patients are paying more and more for prescription drugs. Bresch agreed that more transparency is needed in this regard. Talking on the subject she also brought up the company’s authorized generic, which didn’t go over well.
“You know I know better than that,” Carter said. “Don’t try to convince me that you’re doing us a favor.”
He said that if Mylan had reduced the price of their EpiPens in the first place, they wouldn’t have received rebates from PBMs. Carter requested Bresch to follow up with more details about Mylan-PBM contracts.
Rep. Bonnie Watson Coleman then asked how Bresch came to the hearing, to which she replied she had flown in from Pittsburgh where Mylan’s US corporate offices are based on a private jet. Coleman then asked about the company’s tax rates. Last year, Mylan moved their headquarters to the Netherlands and has since had a 15-17% tax rate, down from roughly 20-25% the year before — this, Coleman points out, means the company pays less on their taxes than the average American. During the discussion, Bresch said that the company is “physically” run out of their Pennsylvania offices, where the execs are based.
“This is a sham and a shell, and it’s really sad to hear this,” Coleman said.
Chaffetz also discussed the EpiPen’s classification under Medicaid as a “Non-Innovator Multiple Source Drug.” Bresch said that the status was decided before the company acquired the patent.
By the end of the hearing things weren’t looking very well for Bresch.
“If I could sum up this hearing, it would be that the numbers don’t add up,” Cummings said. “It is extremely difficult to believe that you’re making only $50 when you’ve just increased the price by more than $100.”
“It just feels like you’re not being honest with us,” he added, saying some of the numbers and charts Bresch used during the hearing seemed over-simplified.
It seems that the representatives took previous dealings with Turing and Valeant Pharmaceuticals to heart with Cummings saying that Mylan’s arguments sounded a lot like what they’ve heard before. Bresch and Throckmorton have been given 10 days to provide the committee documents to answer some of the points that weren’t satisfactorily answered during the hearing.
You can watch the full hearing here: