Mylan (MYL) CEO Heather Bresch struggled Thursday to justify the repeated big price hikes of the company's lifesaving EpiPen devices as criticism continued that Mylan is gouging consumers with a retail cost of more than $600.
"No one's more frustrated than me," Bresch told CNBC's " Squawk Box " on Thursday when she was pressed on the question of why Mylan needed to have such a high price for EpiPens, and why she just didn't cut their price.
"Everybody should be frustrated, " said Bresch, who in recent days has come under fire from U.S. Senators, Democratic presidential nominee Hillary Clinton and patients who are outraged by EpiPen's 400 percent price increases in recent years.
Mylan, in response to that criticism, announced Thursday increased rebates to many consumers who rely on the devices, which are used to counteract a potentially fatal allergic reaction known as anaphylaxis.
The Clinton campaign quickly called those rebate "insufficient," and renewed called for a price slash on EpiPens.
"Discounts for selected customers without lowering the overall price of EpiPens are insufficient, because the excessive price will likely be passed on through higher insurance premiums," Clinton campaign spokesman Tyrone Gayle said. "Since there is no apparent justification for the price increase, Mylan should immediately lower the overall price of EpiPens."
Bresch argued that the problem of drug prices isn't with Mylan or even the pharmaceutical industry, but instead with a health-care system that often requires consumers to pay not just insurance premiums also out-of-pocket for prescription medications, sometimes to the full retail price.
That phenomenon, Mylan has said, has been exacerbated by the increase in the number of high-deductible health plans.
"The patient is paying twice," Bresch said. "They're paying full retail price at the counter, and they're paying higher premiums on their insurance. It was never intended that a consumer, that the patients would be paying list price, never. The system wasn't built for that."
"I am hoping that this is an inflection point for this country," Bresch said. "Our health care is in crisis. It's no different than the mortgage financial crisis back in 2007."
"My frustration is there's a list price of $608," said Bresch, who said that price reflects a system where there are "four or five hands that the product touches and companies that it goes through before it ever gets to that patient at the counter."
She was referring to the fact that after Mylan, intermediaries including wholesalers, retailers and pharmacy benefit managers add to the ultimate cost, and hence can increase the amount paid by patients.
"That $608 is a list price," Bresch said. "What Mylan takes from that, our net sales is $274, so $137 per pen," she said, referring to the fact that EpiPens are sold in packages of two devices.
She noted that Mylan has costs that include "manufacturing the product, distributing the product, enhancing the product, investing."
And she said that the company has been making efforts to have EpiPens placed in schools around the United States, and in other locations, implying that those efforts also boosted the cost of the devices.
But she also acknowledged that high retail prices of EpiPens in the United States effectively subsidize the cost of the devices when they are sold in Europe, at just $100 or $150. Many of the countries there have government-run health-care systems that limit drug prices charged by manufacturers, unlike the U.S.
"We do subsidize the rest of the world... and as a country we've made a conscious decision to do that," Bresch said. "And I think the world's a better place for it."
Bresch, whose father is Sen. Joe Manchin, D-W.Va., has become just latest CEO whose face illustrates the ongoing controversy over rising drug prices, following on the heels of now-ex-Valeant Pharmaceuticals (Toronto Stock Exchange: VRX-CA) CEO Michael Pearson, and former Turing Pharmaceuticals chief Martin Shkreli.
On Thursday, Manchin said, "I am aware of the questions my colleagues and many parents are asking and frankly I share their concerns about the skyrocketing prices of prescription drugs."
"Today I heard Mylan's initial response, and I am sure Mylan will have a more comprehensive and formal response to those questions. I look forward to reviewing their response in detail and working with my colleagues and all interested parties to lower the price of prescription drugs and to continue to improve our health care system," he said.
"This is greed on steroids," legendary consumer advocate Ralph Nader told CNBC on Thursday.
When pressed again on "Squawk Box," why she just didn't cut the price of the devices, Bresch said, "Had we reduced the list price, I couldn't ensure that everyone who needs EpiPen gets one. So we went around the system. That's what we announced today."
Mylan will increase rebates to eligible consumers that will lower what they actually pay out of pocket for EpiPens.
"We responded this morning... ensuring that everyone who needs an EpiPen has an EpiPen," Bresch said.
The company is reducing the cost of EpiPens through the use of a savings card that will cover up to $300 for the EpiPen 2-Pak.
Patients who were previously paying the full price for the EpiPen will have their out-of-pocket cost cut by 50 percent. Mylan also is doubling the eligibility for its patient assistance program, which will eliminate out-of-pocket costs for uninsured and under-insured patients and families, as well.
Shares of Mylan were recently trading up 2.2 percent. (Get the latest quote here.) (MYL) With the company under pressure from members of Congress and Democratic presidential hopeful Hillary Clinton, the stock lost 5.4 percent of its value on Wednesday.
The leading health insurance lobbying group America's Health Insurance Plans, scoffed at Mylan's move.
"We've seen this time and time again. Rather than actually taking steps to address the real problem of soaring drug prices, pharma companies try and cover their price hikes through patient assistance programs and co-pay support," said Clare Krusing, spokeswoman for AHIP.
"None of which will make a drug more affordable for the people who need it most. Exorbitant price increases on prescription drugs are leading to higher premiums and out-of-pocket costs for patients, and pharma companies continue to deny that reality," Krusing said.
Rep. Elijah Cummings, D-Md., the ranking Member of the House Committee on Oversight and Government Reform, blasted Mylan on Thursday.
"Offering a meager discount only after widespread bipartisan criticism is exactly the same tactic used by drug companies across the industry to distract from their exorbitant price increases, as our investigation has shown repeatedly," Cummings said. "Nobody is buying this PR move anymore. Mylan should not offer after-the-fact discounts only for a select few — it should reverse its massive price increases across the board immediately."
On "Squawk Box," Bresch said that as a mother she wants to make sure no one is falling through the cracks.
"We recognize the significant burden on patients from continued, rising insurance premiums and being forced increasingly to pay the full list price for medicines at the pharmacy counter," Bresch said in a statement.
"Patients deserve increased price transparency and affordable care, particularly as the system shifts significant costs to them."
Bresch said, however, that price is only one part of the problem that Mylan is addressing. "All involved must also take steps to help meaningfully address the U.S. health care crisis," she said, "and we are committed to do our part to drive change in collaboration with policymakers, payors, patients and health care professionals."
She said that the health-care system is in crisis, causing the patient to pay for full retail prices at the drug counter and rising premiums on their health insurance. She said that create a bubble that is going to burst, and that patients need to get engaged in their health care.
In addition to expanding cost-cutting programs, Mylan is taking the following actions:
- doubling eligibility for its patient assistance program to 400 percent of the federal poverty level. This means a family of four making up to $97,200 would pay nothing out of pocket for their EpiPen Auto-Injector.
- continue to offer the EpiPen4Schools program. The program, launched in August 2012, has provided more than 700,000 free epinephrine auto-injectors and educational resources to more than 65,000 schools nationwide to help them be prepared for anaphylaxis events among students.
- opening a pathway so that patients can order EpiPen Auto-Injector directly from the company, thereby reducing the cost.
On Wednesday, Democratic nominee Hillary Clinton called on the pharmaceutical company to voluntarily drop the price.
"That's outrageous — and it's just the latest troubling example of a company taking advantage of its consumers," Clinton said in a statement. "It's wrong when drug companies put profits ahead of patients, raising prices without justifying the value behind them."
This chart shows why Clinton and several U.S. senators are fuming over the ever-rising price the EpiPen, the auto-injection device made by Mylan that many people with allergies tote around to potentially save their lives in the event of a severe allergic reaction.
The EpiPen sold for $100 in 2008. In the eight years since, the price has more than quintupled. About 43 million people are at risk from anaphylaxis, or the severe, life-threatening allergic reaction that EpiPen's injection of epinephrine is designed to counteract.
"This outrageous increase in the price of EpiPens is occurring at the same time that Mylan ... is exploiting a monopoly market advantage that has fallen into its lap," Sen. Amy Klobuchar, D-Minn., said last weekend.
Klobuchar, whose own daughter uses an EpiPen, noted that Mylan has seen one competitor, Sanofi's Auvi-Q, exit the market last year due to a recall, and Teva's generic version failed to receive regulatory approval.
The senator has called for the Federal Trade Commission to probe the price hikes. Sen. Chuck Grassley, R-Iowa, the head of the Senate Judiciary Committee, has written Mylan asking how EpiPen's prices were determined.
Drug manufacturers defend rising prices, citing the high cost of years of research and development that goes into making blockbuster drugs. In an effort to provide more transparency on the cost of the drug, Mylan provided this supply chain chart.
— Reuters contributed to this report.
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