If you pay attention to the campaign speeches this year, there’s a frequent refrain you often hear, especially from Republicans running for elective office.
The message is simple and direct: Get government off the backs of businesses. (Of course, you don’t hear this when state and local governments are handing out huge sums to lure a new plant or corporate offices.)
News events have shown that “get government off the backs of business” is more complex than the sound bite suggests. Often times, government starts poking its nose into business matters when corporate America decides not to address concerns voluntarily.
One example is the minimum wage. It had been pretty much stuck at $7.25 since 2009 — until some in Congress started talking about increasing the base pay. Now you see signs in fast food restaurants and convenience stores advertising starting wages of $8 to $10 per hour.
When the subject turns to the unhealthy health of the middle class, where wages also have been stagnant, those opposing government nose-poking have not been helped by corporate executives. Their own compensation has increased by leaps and bounds at the same time as they try to explain why the worker bees’ raises are stuck around 1 or 2 percent per year.
And then Mylan N.V. burst into the news.
The pharmaceutical company has a near monopoly on the EpiPen, with a 98 percent share of the market for injectors. The device allows a person suffering from a potentially fatal allergic reaction to food, drugs or bee stings to inject a pre-measured dose of epinephrine, a hormone that relaxes the victim’s muscles and allows the person to breathe normally.
Mylan gained the rights to the EpiPen in 2007 when the company purchased the generic drugs division of Merck for $6.7 billion. The EpiPen was one of 400 products in the deal.
At the time of the transaction, an EpiPen sold for about $60 each. Now you can only buy them in boxes of two that cost about $600. Because the epinephrine loses its effectiveness after about a year, consumers need to replace the devices annually.
Mylan disputes suggestions that it is guilty of price gouging. Chief executive Heather Bresch puts the blame at the feet of insurance companies that are forcing customers to pay a larger share of the costs. She also implies that Mylan’s own costs have increased, in part, because of a federal law that requires public schools to have a supply of EpiPens on hand for children who may suffer allergic reactions.
Bresch had lobbied members of Congress for that law to boost Mylan’s business — giving us a real life example of the “pay to play” phrase that now swirls through the presidential campaign.
The controversy surrounding the soaring price for the EpiPen has put a spotlight on the compensation of Bresch and the practice of drug companies to sell their products outside the United States at significantly lower prices than inside the U.S.
In Europe, EpiPens sell for $100 to $150, compared with about $600 in the U.S. Unlike the U.S., many European countries limit what manufacturers can charge for their drugs.
About Bresch’s compensation: That has jumped from $2.5 million a year in 2007, when Mylan acquired the EpiPen, to $18.9 million last year. If another company purchases Mylan, her “golden parachute” allows her to float away with about $61 million.
Bresch talks about Mylan needing an adequate revenue stream to pay for its research and development work. Of course, it’s important to note that Mylan’s focus is generic drugs, which are less expensive to bring to market because they mimic the ingredients and dosages of brand-name drugs after those lose their patent protections.
There are two other important details about Mylan that you need to know:
The research and development of the EpiPen was done using the taxpayers’ money, not private business’ money, to develop the auto-injector for use by the U.S. military.
In 2014, Mylan went through a so-called corporate inversion and moved its place of incorporation to the Netherlands — although Bresch and other executives remain at the operational headquarters in Pennsylvania. The inversion lowered the company’s income tax rate from 25 percent to the teens, putting more cash in its bank account.
The EpiPen controversy leads to a fundamental question:
How much profit should a drug company make? Should it be permitted to squeeze as much money out of consumers as it wants, even if those consumers rely on the company for lifesaving products — especially when government pays for a significant portion of the research?
Our nation is overdue for a broad discussion of drug prices and the role the government should play if corporate America is unwilling to police itself in the public’s interest.
Consumer advocate Ralph Nader didn’t beat around the bush about the EpiPen controversy, telling Forbes magazine, “This is greed on steroids.”
It’s hard to disagree.
by Randy Evans
Reprinted from Bloomfield Democrat
Photo via Wiki Commons