Welcome to this week's Future Proof post on Physician's Money Digest (PMD). Lots have already been said and written about Mylan and the Epipen pricing controversy. Here are my 2 cents on the topic. As usual, check out the full post at PMD. An excerpt is provided below.
By now we have all heard that Mylan Pharmaceuticals is in hot waters for hiking the price of 2 EpiPens from $100 in 2007 to more than $600 today. Mylan and its CEO Heather Bresch are now being mentioned alongside infamous names like Valeant and Martin Shkreli. This new-found notoriety for Mylan brings to mind Gordon Gekko’s famous “Greed is Good” speech. Let’s examine the facts.
Mylan N.V. is an American-Dutch pharmaceutical company founded in 1961 in White Sulphur Springs, West Virginia. Currently the company’s American headquarters is hosted in Canonsburg, PA. Mylan acquired the rights to market and distribute the EpiPen line of epinephrine autoinjectors in America from Merck in a 2007 deal.
In 2007, the EpiPen (2-pak) wholesaled for $100.
Starting in 2009, Mylan began increasing the price of the EpiPen (2-pak). The latest price hike came in May 2016 from $461 to $609, sparking widespread public outcry.
In the same period of time, the profit margin on the EpiPen increased from 9% to 55%.
In the same period of time, Mylan CEO Heather Bresch’s compensation increased from $2.5 million to nearly $19 million.
In 2015, EpiPen accounted for $1.5 Billion in sales for Mylan and 40% of its profits.
Outside of the US, where the distribution of EpiPens is not controlled by Mylan, the price of the EpiPen remains relatively affordable. For example, in France, the EpiPen (2-pak) costs $85. And just to the north, Canadians pay ~$100 for a single EpiPen injector.
In the week since the EpiPen controversy became public, Mylan’s stock (NASDAQ: MYL) has dropped 11.27%.
Future Proof Take:
The Mylan EpiPen controversy is just the latest in a series of stories that seemingly represent corporate greed gone haywire. Companies hiking prices for their products is nothing new. It is often justified by the rising cost of doing business, but occasionally simply represents an attempt at juicing profits. Here are 2 parallels in the food & beverage industry: