Mylan offers more details on EpiPen’s costs
Used wrong tax rate in profit calculation
Pittsburgh Post-Gazette
When Mylan CEO Heather Bresch testified before a U.S. House committee last week that the company’s profit on its EpiPen emergency allergy treatment was only about $50 per pen, several lawmakers appeared incredulous, accusing Ms. Bresch of not being candid and demanding a more detailed breakout of costs.
On Monday, Mylan provided more information in a filing with the U.S. Securities and Exchange Commission showing that in its profit calculations, it had used the statutory U.S. tax rate of 37.5 percent. That’s a much higher rate than the company actually pays, and applying it made the product appear less profitable.
Mylan did not respond to emails Monday seeking comment on its SEC filing.
In a statement to other media outlets, the company said that using the statutory tax rate for its profitability analysis of EpiPen sales in the U.S. was the “standard.”
According to Mylan’s financial reports, the company’s overall effective tax rate — the rate paid after all deductions — was 18 percent in the first six months of this year and 7 percent in the comparable period last year. For all of 2015, Mylan’s effective tax rate was 7.4 percent.
In its statement Monday, Mylan said: “Just as we did not use a blended global tax rate, we did not allocate corporate expenses associated with running the business, which would have further reduced [EpiPen’s] profitability.”
The SEC filing gave greater detail about how the company came up with the $50 profit figure that it had provided to Congress at the hearing last week.
The company operates out of Cecil, although it reincorporated in the Netherlands in February 2015 as a move meant to lower its tax bill.
Mylan bought the rights to the EpiPen auto-injector in 2007 and since then has hiked the price 16 times, raising the list price from
around $100 a two-pack to about $600, according to Truven Health Analytics.
The skyrocketing cost has touched off a public backlash and drawn the scrutiny of law enforcement and Congress.
Ms. Bresch’s testimony before the House Oversight Committee last Wednesday elicited outrage from Republican and Democratic lawmakers alike. They accused the company of price-gouging and taking advantage of Americans struggling to afford the life-saving device, which has little competition in the marketplace.
“Because you have such a stranglehold on the market, you can do what you want, and you have,” Rep. Gerald Connolly, D-Va., scolded the CEO at the hearing.
Ms. Bresch sought to temper the criticism by reiterating the company’s efforts to make EpiPens more affordable — including giving them away free to some 65,000 schools — and downplaying profits.
But lawmakers weren’t impressed.
“It doesn’t make sense,” committee chairman Rep. Jason Chaffetz, R-Utah, chastised Ms. Bresch after listening to her breakdown of costs and profits. “This is why we don’t believe you,” he said.
Patricia Sabatini: psabatini@post-gazette.com or 412263-3066.