As Congress Prepares To Crackdown On Epipen Price Increases, A Problem Has Emerged

Two days ago we reported that as Congressional anger mounts in this year's episode of "pin runaway healthcare spending on the evil pharmaceutical company", politicians like Chuck Grassley, Bernie Sanders, and countless more, slammed Mylan's Epipen price increases, which as shown in the chart below while not as dramatically "sharp" as Shkreli's infamous 5000% price hike for Daraprim pills to $750 a pill in the summer of 2015, have been quite aggressive nonetheless.


So far, this year's melodrama has culminated with Grassley sending an angry letter to Mylan CEO Heather Bresch, in which he said that "the substantial price increase could limit access to a much-needed medication."

There was more political outrage this week:  “I am deeply concerned by this significant price increase for a product that has been on the market for more than three decades, and by Mylan’s failure to publicly explain the recent cost increase, which places a significant burden on parents, schools and other purchasers of the EpiPen,” Senator Mark Warner, a Virginia Democrat, said Tuesday in a statement, noting that he is a parent of a child with severe allergies.

Senator Richard Blumenthal, a Connecticut Democrat who has asked the company to lower its prices, is holding an event on Wednesday where he will call for investigations by the Senate Judiciary Committee and the Federal Trade Commission into potential antitrust violations and deceptive and illegal trade practices.

Bresch has been criticized for increasing the price of the devices to prevent fatal allergy reactions from less than $100 for a pair in 2007 to more than $500 today. Bresch, who was president in 2007 and has since become chief executive of the global pharma giant, went from making $2,453,456 nine years ago to $18,931,068 last year, according to filings from the company. The pay increase, first reported by NBC News, came as Mylan repeatedly raised the price of the live-saving epinephrine device by increments of 5, 10 and 15%.

As a result, it is likely that Bresh will soon be invited to Congress to explain her price increases in this year's episode of kangaroo court, meant to deflect attention from the real culprit behind out of control healthcare price increases: the  government's own policies.

As we said on Monday, "the biggest irony, however, just like last year, is that it is the permissive government regulations and the US reimbursement system that allows pharma companies like Mylan to charge as much as they want, and - mostly - get away with it. However, since that particular system is too big, and too unwieldy to change, it appears that Mylan will be this year's sacrificial distraction, meant to placate the public, even as the underlying problem with the US healthcare system remain largely unchanged."

However, a problem has emerged if Congress plans to follow the usual script and call Bresch to Capitol Hill next month to explain her company’s justification for raising the price on the life-saving allergy shot.

As Bloomberg writes this morning, that could be awkward, since she’s the daughter of Democratic Senator Joe Manchin of West Virginia.

This means that any hearing would likely reveal that close lobby ties between pharma companies and the US government: as Bloomberg adds, congressional anger may be fueled by the company’s tactics in pushing legislation that helped boost the use of EpiPens. Mylan spent about $4 million in 2012 and 2013 on lobbying for access to EpiPens generally and for legislation, including the 2013 School Access to Emergency Epinephrine Act, according to lobbying disclosure forms filed with the Office of the Clerk for the House of Representatives. Mylan also was the top corporate sponsor of a group called Food Allergy Research & Education that was the key lobbyist pushing for the bill encouraging schools to stock epinephrine auto-injectors, of which EpiPen is by far the leading product.

Heather Bresch, chief executive officer of Mylan NV

Unlike the legendary grilling of Martin Shkreli, putting Bresch on the hotseat would reveal to the American public that the real culprit behind soaring drug and device prices is not just "greedy CEOs", but also Congress itself, whether by way of accepting pharma lobbying dollars, due to family connections, or simply as a result of a flawed regulatory regime.

As a reminder, recall that as per our 2012 post, the greatest IRR on any investment is the 77,500% ROI generated by big pharma lobbying efforts in Congress. Perhaps it is time someone asked just what they get for their money (and why it is so cheap to bribe US politicians).



To be sure, Bresch's connections to Capitol Hill already have some lawmakers tiptoeing around the usual Washington blame game.

For example, Blumenthal, a member of the Senate Judiciary Committee and a co-sponsor of the 2013 schools bill, asked Bresch in a letter Monday to explain the “shocking price increases.”

However, in an interview Tuesday, he was less eager to talk about Bresch herself or the prospect that she might soon be testifying to the committee.

He initially answered during one telephone call that he was unaware that she had any direct involvement in the pricing. Then, in a follow-up call, Blumenthal responded when asked again about the possibility of her coming before Congress by saying, “I am just not going to comment on that.

Ross Baker, who Bloomberg writes is a political scientist at Rutgers University in New Jersey, said Tuesday that he assumes Bresch’s father, Manchin -- who is not on the Judiciary Committee -- would recuse himself “and put a lot of distance between himself and any investigation” into the matter. “He’d be unwise to rise to the defense of Mylan,” Baker said.

As such, the populist freak out of Epipen may be cut short, as the Senate seeks to quickly sweep the scandal under the rug. In fact, the wheels appear to already be in motion: a spokeswoman for committee Chairman Jason Chaffetz of Utah, said that as of Tuesday afternoon no hearing was scheduled. “And no comment beyond that" said the spokeswoman, M.J. Henshaw cited by Bloomberg.

Meanwhile, the top Democrat on the Oversight Committee, Elijah Cummings of Maryland, said Tuesday that he wants a hearing when lawmakers return from their summer break to Washington in September.

“The recent price increase for EpiPens places a financial burden on those who desperately need this drug to prevent life threatening allergic reactions, which is why we have expressed our desire for an investigation of this issue and for the Committee to hold a hearing in September,” Cummings said Tuesday in a statement.

We are confident he will change his tune once he realizes that the media spotlight may inconveniently turn right on him and his co-workers should Congress proceed with its now traditional Pharma CEO witch hunt.