As you have likely heard, the pharmaceutical company Mylan and its CEO, Heather Bresch, have come under immense scrutiny for the firm's EpiPen pricing policy. The EpiPen is a medication delivery device intended for use by those susceptible to anaphylactic allergic reactions (e.g., peanuts, shellfish, insect bites etc.).
The use of EpiPens during an allergic episode can make the difference between life and death for those prone to severe allergic reactions. It's clearly not a luxury item. However, at a list price of $608 per 2-pack, it's priced like one!
Shockingly, the price for an EpiPen has skyrocketed by over 400 percent under Bresch's watch. Through shrewd marketing efforts, failed competitors and helpful legislation (which requires its availability at public schools), Mylan has cornered the market on this allergy medication. According to the Washington Post, its prescriptions number in excess of 3.6 million.
With this kind of market penetration and mammoth customer need, a firm can name its price for its product - and, there's not much a person in need of the lifesaving drug can do about it. But, as the expression suggests: "just because you can, doesn't mean that you should."
That said, when asked to comment on the situation in a recent CNBC's Squawk Box segment, the best that Bresch could do to justify her firm's pricing model was:
- "That $608 is a list price. What Mylan takes from that, our net sales is $274. So $137 per pen. And against that, manufacturing the product, distributing the product, enhancing the product, investing."
- "The reality is and the brand pharmaceutical market, this isn't an EpiPen issue. This isn't a Mylan issue. This is a health care issue."
- "In one year alone 2015 there were a thousand anaphylactic events in schools and 25% of the time people had no idea they had a known allergy. So the EpiPens were used, they were there to prevent serious continued adverse events. So nobody wants them everywhere more than I do. We're now passing legislation, 30 states to have them in restaurants, hotels. Because like I said, they need to be everywhere because when you need them, seconds count."
- "Look, we're going to continue to run a business. And we're going to continue to meet the supply and demand of what's out there."
This coming from a person whose pay increased by over 670% in her tenure as CEO. Now, I don't know about you, but, these comments didn't convince me that Mylan is anything more than opportunistic and greedy. To paraphrase, here's what she said to justify the price of EpiPens:
Mylan doesn't get to keep all $608 per 2-pack. It costs something to develop the product. Distributors and retailers get a piece of the action, too. The firm is not responsible for its EpiPen pricing model, rather, Mylan is a victim of a failed Health Care system. But, the product does save lives and Mylan's lobbyists are hard at work with legislators to create laws that broaden the market for the product...And, it's just business.
Certainly, there were hundreds of ways in which Bresch could have responded to the inquiry into Mylan's pricing policies. As a strategy consultant and executive coach, I would have advised her to take the high road by:
- Take full responsibility for the pricing of the product (not suggest that Mylan is a victim of a poorly defined Health Care System),
- Describe how the desire to raise stockholder value is always in the forefront of every executive's mind and that sometimes it is this desire that contributes to aggressive and unfortunate product pricing (and not talk about the fact that wholesalers and retailers get a piece of the pie).
- Further, I might have suggested that she proffer: in hindsight, the firm is considering a myriad of ways to do right by their customers, not least of which is the introduction of discounts, the launching of a generic (which the firm did announce today) and the exploration of new pricing models (I definitely would have told her to stay clear of summing the situation up as a "supply and demand" thing) . But, that's just me.
To close, it's my guess that we've not heard the end of this. But, I'm sure that the crisis management team at Mylan is hard at work to spin the story behind the story correctly. Unfortunately, Heather Bresch didn't do herself, or her firm, any favors trying to rationalize the 400% price increase for EpiPens. Clearly, the story reflects poorly on Mylan and its CEO just may have to take the fall for this debacle.
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