There’s an interesting fight going on inside Mylan Pharmaceuticals. They, of course, are the longtime generic drug maker whose EpiPen prices have (understandably) made them a lightning rod for complaints about drug pricing in general. This New York Times article will give you the flavor of the company, and most unappetizing it is:
To understand Mylan’s culture, consider a series of conversations that began inside the company in 2014. A group of midlevel executives was concerned about the soaring price of EpiPens, which had more than doubled in the previous four years; there were rumors that even more aggressive hikes were planned. (Former executives who related this and other anecdotes requested anonymity because they had nondisclosure agreements or feared retaliation. Aspects of their accounts were disputed by Mylan.)
In (2014) meetings, the executives began warning Mylan’s top leaders that the price increases seemed like unethical profiteering at the expense of sick children and adults, according to people who participated in the conversations. Over the next 16 months, those internal warnings were repeatedly aired. At one gathering, executives shared their concerns with Mylan’s chairman, Robert Coury.
Mr. Coury replied that he was untroubled. He raised both his middle fingers and explained, using colorful language, that anyone criticizing Mylan, including its employees, ought to go copulate with themselves. Critics in Congress and on Wall Street, he said, should do the same. And regulators at the Food and Drug Administration? They, too, deserved a round of anatomically challenging self-fulfillment.
Lovely. As the article says, the company has decided that all the criticism is just the cost of doing business, and that their business is selling EpiPens at the highest cost they can. Bad press, upset parents, calls for them to change – none of that means much. So what would? The two things I can imagine are some big action at the FDA or some change inside the company’s management. But the FDA is not a price-regulation agency (which is something that the general public hasn’t always taken in). They regulate safety and efficacy for drug approvals, and post-approval they look for adverse events (in case labeling has to be changed or a drug has to be pulled entirely), and they also try to make sure that drugs are not being marketed improperly (with false or otherwise illegal claims). There is really no FDA regulatory framework for them to step in and say “This drug costs too much”.
In the generic drug market, though, an indirect method would be to make sure that there is enough competition (new nongeneric drugs are, of course, granted a temporary monopoly through the patent system). The agency has recently been talking about this, and I think it’s a good thing. Generic drugs are supposed to be cheaper, and there should be price competition among them, but in recent years many companies have found ways around these ideals. That gives them a drug whose market is already established and whose manufacturing issues have long since been worked out, an almost completely de-risked product. Squeezing the prices on these is not the idea, but that’s just what’s been going on.
Another thing that happens when you operate this way is that other government agencies get motivated to take a closer look at you. Last fall, Mylan paid $465 million to settle a misclassification problem that led to them getting higher rebates than they should have on EpiPens distributed through Medicare. But now it appears that there’s another $1.27 billion involved, according the the Health and Human Services Office of the Inspector General. It’s highly likely that the company’s own public behavior has brought this on, and it’s hard to say how long it might have taken for this to get picked up otherwise (if ever).
Now to company management. From that quote above, you’d get the impression that it’s going to be rather hard to get the attention of Mylan’s upper level executives. But there is one avenue: the corporate board. As it happens, some of the company’s investors are trying to replace the board members, and just this morning, ISS (Institutional Shareholder Services) came down on their side. They’re recommending that shareholders vote against ten directors and against ratifying the compensation plans for the top executives. That’s a pretty big deal, since ISS handles the proxy voting for a lot of big investors and funds, and if given the go-ahead can vote things en masse. This, you can be sure, is a cause for concern in the upper suites, and it should be.