This is quite the oversight.
The pharmaceutical company Mylan, which makes the EpiPen, is now saying it understated the profits it derives from the life-saving allergy drug by 60% in a congressional hearing last week, according to The Wall Street Journal.
It had said it made $100 off each $608 two-pack of the drug it sold.
The Journal reported, however, that Mylan “substantially reduced its calculation of EpiPen profits by applying the statutory US tax rate of 37.5%.”
Mylan paid a 7.4% tax rate last year after moving its business to The Netherlands for tax purposes.
The company’s CEO, Heather Bresch, was called to the House of Representatives to answer for why her company had raised the EpiPen’s price by 500% since it purchased the drug in 2007.
Bresch didn’t have a lot of answers for the House. Her answers about margins and how much her company made on the drug were fuzzy at best, and she refused to say her company raised the price of the drug to make more money.
“If I could sum up this hearing, it would be that the numbers don’t add up,” Democratic Rep. Elijah Cummings of Maryland said. “It is extremely difficult to believe that you’re making only $50 when you’ve just increased the price by more than $100.”
Bresch also didn’t bring the documents she was asked for, a fact that left many members less than thrilled.
Republican Rep. Jason Chaffetz of Utah said he didn’t think Bresch was “being honest” with the members. Republican Rep. Buddy Carter of Georgia asked for more information about Mylan’s distribution deals with pharmacy benefit managers, and Democratic Rep. Tammy Duckworth of Illinois asked about the company’s EpiPen4Schools program.
Mylan told The Journal it had already provided this corrected profit figure to Congress on Monday morning. And in a statement provided to Business Insider, it justified its initial use of the higher tax figure.
“Tax is typically included in a standard profitability analysis and the information provided to Congress has made clear that tax was part of the EpiPen® Auto-Injector profitability analysis. In fact, Mylan has provided Congress with a detailed analysis of EpiPen® Auto-Injector profitability,” the company said.
“It also is important to note that use of a statutory tax rate for the jurisdiction being analyzed (in this instance, the U.S.) is standard. Just as we did not use a blended global tax rate, we also did not allocate corporate expenses associated with running the business, which would have further reduced its profitability. We believe it is most appropriate, and conservative, to focus entirely on EpiPen® Auto-Injector specific costs and associated taxes.”
Want more Mylan? Listen to BI’s Linette Lopez and Josh Barro talk EpiPen pricing in an episode of their podcast, Hard Pass: