Mylan Clarifies EpiPen Profit Figures it Provided to Congress Last Week
September 26 2016 - 11:50AM
Dow Jones News
When Mylan NV's chief executive testified before a congressional
committee last week about steep price increases on its lifesaving
EpiPen drug, House members badgered her to provide more evidence
for the company's claim that its profits were just $100 for a
two-pack of the injectors, despite a $608 list price.
The committee members left unsatisfied. Now it appears they were
right to seek clarity.
In response to questions from The Wall Street Journal, Mylan now
says the $100 figure presented by CEO Heather Bresch included
something the company didn't clearly convey to Congress—taxes. The
company substantially reduced its calculation of EpiPen profits by
applying the statutory U.S. tax rate of 37.5%.
Without the tax-related reduction, Mylan's profits on the EpiPen
two-pack would be closer to $160, or 60% higher than the figure the
company gave Congress. The company sells about 4.1 million EpiPen
two-packs in the U.S., analysts said.
Mylan said it provided the House Government Oversight Committee
early Monday morning more detailed figures on its EpiPen profits,
clarifying that the numbers were after taxes. The company called
the inclusion of taxes standard for a product-line profitability
analysis like the one Congress asked for.
Mylan's explanation left some analysts scratching their
heads.
The 37.5% tax rate Mylan applied to EpiPen "has nothing to do
with reality," said Ryan Baum, an analyst with SSR Health LLC, a
health care investment-research firm in Stamford, Conn., because
the company didn't pay that much tax on the product. Mylan had a
low 7.4% overall tax rate last year, he said, and a negative
effective tax rate in the U.S. where the EpiPens were sold.
"That implies this notional ($100) profit figure also has
nothing to do with reality," Mr. Baum said. He added that Mylan
executives have the discretion to present financial figures any way
they want, but "good behavior would be to document your figures in
a more transparent manner."
Mylan said applying an overall effective tax rate wouldn't be
correct, because that figure takes into account other countries'
rates and companywide tax strategies. The company also said any
lack of clarity wasn't intentional.
Write to Mark Maremont at mark.maremont@wsj.com
(END) Dow Jones Newswires
September 26, 2016 11:35 ET (15:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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