Two weeks ago, Mylan CEO Heather Bresch got up in front of Congress and lied about how much profit the pharmaceutical company makes on the EpiPen. And Congress is pissed.
Two congressmen who were incredibly vocal at the hearings are now demanding to see everything from complete profit and loss statements for the company for the past 5 years to the materials that were used to prepare Bresch before she gave testimony. They especially want to know about the charts that she held up during testimony (one of which is pictured above), which turned out to be bullshit.
Republican Jason Chaffetz of Utah, and Democrat Elijah Cummings of Maryland have sent Bresch a letter asking her to explain why she told the Congressional committee things that turned out not to be true. Bresch repeatedly said that the company makes just $100 per EpiPen pack. But Mylan actually makes $160. Mylan’s defense? They say that they subtracted “taxes.” But experts say this equation makes no sense.
And to make matters worse, Bresch never mentioned that they were subtracting these taxes from their equation, leading Congress to believe that their obfuscation was deliberate and calculated.
The letter from Chaffetz and Cummings points out that the only time taxes were mentioned was when they talked about how the company had recently moved its headquarters overseas—a move commonly called an “inversion” where companies dodge US corporate taxes by playing shady games to establish their operations in another country, even when that company is still effectively based in the US.
From the letter:
During your testimony, you frequently referred to a graphic, titled “EpiPen Auto-Injector Estimated Profitability,” which identified Rebates & Allowances, Cost of Goods Sold, and Direct EpiPen Auto-Injector Costs as factors that lowered the profitability of the EpiPen.
The graphic made no mention of taxes or the tax assumptions used by Mylan to estimate the $100 profit number. Neither did your written testimony. The only time you mentioned taxes during the hearing was to disclose that Mylan’s company-wide effective tax rate is between 15 and 17 percent, as a result of Mylan’s decision to move its headquarters overseas.
Failing to disclose tax assumptions that formed the basis for the $100 profit per pack claim, despite opportunities to do so before and during the hearing, raises questions. During the hearing, Chairman Chaffetz noted that Mylan’s “dumbed down financials” did not make sense without explanation. Ranking Member Cummings similarly stated, “You know, your numbers don’t add up... And it is extremely difficult to believe that you are making only $50 profit when you just increased the price by more than $ 100 per pen.”
So Congress is now asking for more information. The letter includes a list of 18 things that Chaffetz and Cummings would like to see from Mylan. And they’re not messing around. They’re demanding to see documents produced by the company to prepare Bresch for her testimony. Presumably, they want to know if the company coached her on how to mislead Congress about the profit they were making on the EpiPen.
The complete list of demands from the letter include:
- All documents, including internal analyses or memoranda, that have been provided to, or prepared for, you or the Mylan Board of Directors, referring or relating to EpiPen sales, profits, costs, manufacturing, distribution, or any other subject that could impact the costs or profitability of the drug-device combination product.
- All documents referring or relating to your testimony to the Committee, including, but not limited to, any such documents that you relied on to prepare for the September 21, 2016 hearing.
- All documents and communications referring or relating to Mylan’s tax rate, including, but not limited to, those referring or relating to the profitability of the EpiPen.
- Documents sufficient to show Mylan’s actual U.S. tax rate, U.S. taxable income, and the amount of U.S. income tax Mylan paid to the Internal Revenue Service, for each year since 2007.
- A list of Mylan’s profits and expenses relating directly to the sale of EpiPens for each year from 2007 through 2015, including, but not limited to: [a huge list of topics that can be read in full here]
- All agreements, contracts, and communications to or from manufacturers, suppliers, distributors, wholesalers, insurers, pharmacy benefit managers, retail pharmacies, and any other partners in the distribution channel for EpiPens, referring or relating to EpiPens.
- Documents and communications referring or relating to the difference in price between EpiPens sold in the Netherlands and EpiPens sold in the United States.
- Documents sufficient to define the terms “rebate,” “allowances,” and “direct EpiPen Auto-Injector Costs” that appeared in the “EpiPen Auto-Injector Estimated Profitability” chart you displayed during the hearing.
- Documents and communications referring or relating to whether “rebate” and “allowances” (as used in the aforementioned chart) include rebates or discounts provided by Mylan to any state or federal entity under any healthcare program including Medicaid, Medicare, and the Department of Veterans Affairs.
- Documents sufficient to show whether Mylan accounts for research and development both as an operating cost and as an expense subtracted from profits on a company-wide basis.
- Documents sufficient to show Mylan’s annual charitable contribution deductions for tax years 2007 to 2015.
- All Profit and Loss statements prepared for Mylan for the last five years.
- Documents and communications referring or relating to whether Mylan has, or intends to extend, any existing patents or FDA market exclusivity, or file any new patents, for the extended shelf-life formulation of the EpiPen as you described during the hearing.
- Documents and communications referring or relating to whether the authorized generic version of the EpiPen will be covered by the My EpiPen Savings Card or Mylan’s Patient Assistance Program.
- Documents and communications referring or relating to all rebates, discounts, and any other payments Mylan expects to provide to pharmacy benefit managers, insurers, manufacturers, distributors, wholesalers, suppliers, retail pharmacies, or any other partners in the distribution channel in connection with the authorized generic EpiPen.
- All documents referring or relating to Mylan’s projected annual gross and net sales revenue and profits, from sales of the authorized generic.
- Documents and communications referring or relating to Mylan’s estimate that the net price to Mylan per 2-pack of EpiPens will be $200 after the authorized generic is launched (as the aforementioned chart stated).
- Documents sufficient to identify all Mylan employees who have worked with the Centers for Medicare & Medicaid Services (CMS) regarding the classification of the EpiPen as a generic drug under the Medicaid Drug Rebate Program, and all CMS employees who have worked with Mylan regarding the classification of the EpiPen under the Medicaid Drug Rebate Program.
Congress isn’t too happy about Bresch’s testimony. And it’s easy to see why. The letter says that Mylan has to produce everything on the list above before October 7, 2016. But we’ll see if they produce anything at all. I have a feeling that Mylan’s lawyers are going to push back on more than a few of these items.