Health

EpiPen And Mylan: A Story Of Greed And Cronyism

| by Nik Bonopartis
An EpiPen injector packageAn EpiPen injector package

The firestorm surrounding Mylan CEO Heather Bresch and the company's price-gauging has been mostly focused on the EpiPen, the auto-injector that can literally mean the difference between life and death for people with severe allergies.

Americans are rightly outraged that Bresch and Mylan jacked up the price of EpiPens -- from $100 when Mylan acquired the rights to the drug to more than $600 today -- while the company profited enormously and Bresch earned tens of millions for herself.

But the story is so much more than that -- it's a story about epic, unadulterated greed, nepotism, cronyism, and how the wealthy and elite live by a different set of rules than everyone else.

Bresch is the daughter of Sen. Joe Manchin, a Democrat from West Virginia. Manchin was governor of that state back in the 1990s, when he pulled a few favors and got his daughter a job at Mylan.

By 2002 Bresch was Mylan's head lobbyist, and in 2007 she was promoted to chief operating officer at the pharmaceutical company. The company touted Bresch's MBA degree on its website and in a subsequent press release about Bresch's promotion. But when a reporter at the Pittsburgh Post-Gazette called West Virginia University to confirm Bresch's credentials, he learned Bresch never earned that degree.

So Manchin stepped in, using his position and privilege to get the university's president to "fix" the resulting scandal. The school obliged, forging grades and backdating the MBA degree to make it look like Bresch had indeed earned it.

Most people caught lying on their resume would be fired, but Bresch was the daughter of a powerful politician and, as writer Michael Winship noted, knew "how to adroitly manipulate government and its regulations," drawing on her upbringing and political connections to successfully lobby for legislation that would help Mylan earn billions.

That favorable legislation includes the 2013 School Access to Emergency Epinephrine Act, which made EpiPens a standard part of any school nurse's medicine cabinet. Eleven states require schools to stock EpiPens, medical publication STAT notes, and more than 65,000 schools participate in the program, with federal incentives to entice them.

Schools receive a set amount of free EpiPens each year, but they have to buy additional pens, and to get the free pens they're required to sign an agreement that they won't buy generic versions from competitors.

The deal isn't altruism on the part of Mylan. By pushing the program, Bresch and Mylan created a captive market for EpiPens -- the free EpiPens cost only a few dollars to manufacture, and the payoff is more than worth it as the company sells even more units.
 
As time went on, Bresch helped Mylan capture 90 percent market share for auto-injectors and used her political connections to muscle potential competitors out of the business, again playing the system to maintain an effective monopoly and captive market.

"As it turns out, Mylan has a great friend who keeps would-be competitors out of the market, or at least makes it so difficult for them that they eventually go out of business. That friend is the FDA," the Mises Institute's Jonathan Newman wrote.

The FDA has helpfully stalled several rivals who sought to bring EpiPen alternatives to market, with industry site FiercePharma noting in June that Mylan "is home free -- a status it must be getting used to, given the failures that have repeatedly befallen its competitors."

"Mylan has been repeatedly protected from competition," Newman wrote, "and it has repeatedly (and predictably) increased the price of EpiPens in response."

But why stop there? Bresch had seen her own salary soar into the tens of millions as she ruthlessly hiked the prices of EpiPens and other drugs manufactured by Mylan.

Still, that wasn't enough, so in 2014 Bresch led the "inversion" effort to incorporate the pharmaceutical giant in the Netherlands.

The company's headquarters remained in Pennsylvania, the majority of its profits still came from American markets, and it still enjoyed the benefits of pliant lawmakers, but by nominally becoming a Netherlands-based company, Mylan avoided paying its share of U.S. taxes.

"I can assure you, from what I know of Mylan, they'll take every loophole," Bill George, a senior fellow at Harvard Business School, told Business Insider.

But wait, that's not all!

Bresch knew the gravy train could be coming to an end in June after Wells Fargo analyst David Maris released a report detailing how Mylan had raised the price of seven medications it offers by 100 percent or more since January, the Guardian reported.

With Maris warning of "greater regulatory scrutiny," Bresch dumped $5 million worth of Mylan shares on Aug. 9, the same day Mylan released its latest earnings report, and just days before the EpiPen controversy started to gain steam.

Bresch did all that before she went on CNBC to defend charging more than $600 for an autoinjector that costs just a few dollars to make.

"No one's more frustrated than me," Bresch said. She must have been frustrated all the way to the bank.

Through all this, Bresch's father has remained a supposed representative of the people as a sitting U.S. senator. When his daughter incorporated her firm in the Netherlands, Manchin tried to publicly distance himself from Mylan and said so-called "inversion" to dodge corporate taxes should be illegal.

But Manchin hasn't done anything to prevent American companies from incorporating overseas to avoid paying their fair share in taxes, and as Winship pointed out, "Dad got a taste too" -- Mylan was Manchin's second-highest contributor to the senator's campaigns between 2011 and 2016, according to OpenSecrets.

The senator has tried to walk a tight rope since the EpiPen controversy erupted, vowing to fight unconscionable pharamaceutical price-gauging while studiously avoiding mentioning his daughter's name.

But that's not going to work, and hopefully voters in West Virginia will give Manchin the boot when he's up for re-election. Because no matter how Manchin tries to finesse the scandal, no matter how much he distances himself from his daughter and Mylan, he raised a daughter who represents the absolute worst of American corporate greed and cronyism. He used his position and power to nudge his daughter's career, to smooth over scandals, and to help bend legislation in favor of her company.

Americans won't forget, the Huffington Post's Andrew Palumbo writes in an open letter to Bresch:

Every expensive meal at a Michelin star restaurant that you treat your family to is paid for by the thousands of families who go hungry so their son can have an EpiPen. Every flashy new car, SUV and boat that you buy yourself is money that would have gone to pay car loans for thousands of needy families. Instead, they bought their daughter an EpiPen and their only family car has been repossessed as a result. Every vacation home you buy is paid for by thousands of families who have skipped mortgage payments to pay for EpiPen packs for the multiple children in their families with severe allergies.

Heather Bresch and Sen. Manchin, how do you sleep at night?

Sources: Fortune, NBC News, BillMoyers.com, OpenSecrets, Mises Institute, Fierce Pharma, STAT, Los Angeles Times, Business Insider, Washington Post, Huffington Post / Photo credit: Intropin/Wikimedia Commons

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