Pharmaceutical price gouging is a rare beast, in that it’s an utterly morally bankrupt activity taking place in full view of the public eye. Made famous by the contemptuous Pharma-bro Martin Shkreli – who infamously hiked the price of a drug used to treat a deadly parasitic infection by over 4,000 percent – it seems another company has been caught in the spotlight doing the same thing.
As has been widely reported, Mylan Inc., a manufacturer of life-saving EpiPens, recently raised the price of a two-pack of the anti-allergic devices from around $50 in 2007 to $608, triggering outrage across the US. The CEO of Mylan, one Heather Bresch, was brought before Congress to testify why this price hike occurred, and she was caught lying under oath.
Under intense interrogation by House members, Bresch claimed that despite the charge increase, the company “only” makes $100 per two-pack, with the rest going to various middle men.
Thanks to the continued pressing of journalists at the Wall Street Journal, the company released a statement clarifying that they actually make a $160 profit, not $100. Their profit margin is therefore 60 percent higher than they claimed it was, meaning that they somewhat pointlessly massaged the figures a bit.
As it turns out, the reason Mylan used the $100 figure is because they based their calculations on a US tax rate of 37.5 percent. As pointed out by the WSJ, this “has nothing to do with reality.” Mylan actually had a 7.4 percent overall tax rate thanks to its wicked ways with several tax avoidance schemes, and there was no way this could be used to produce the $100 figure.
Clearly, the company and Bresch were squirming around under the intense focus of the press, and they tried to wriggle out of their dilemma using some old-fashioned, but really poor, obfuscation. Making a healthy profit is all they are focused on, not the well-being of those that depend on EpiPens in their day-to-day lives.
As reported by ArsTechnica, Mylan made $671 million from EpiPen sales in the last year, which is a 900 percent increase from their 2008 profits. As a point of comparison, just $1 of epinephrine is used in each individual auto-injection device, which itself costs just a few dollars to make.
Shkreli has predictably leapt to the defense of Mylan, blaming insurers for not covering the overall cost. He also assured that Mylan doesn’t make that much money from EpiPens, but it’s now very clear that this is nonsense. In fact, Mylan’s profit margin on the EpiPen is 55 percent, compared to its overall product profit margin of 20 percent.
Price gouging needs to be stamped out, aggressively – and only one of two US presidential candidates has vowed to act. You’ll never guess which one.
[H/T: Wall Street Journal]