Keep your $465 million.

Posted on November 1, 2016 by Aaron J. Freiwald

Two Pack of Epi-Pens

Mylan’s proposed half-billion dollar settlement with the federal government — an attempted quick fix for the bad publicity the Epi-pen maker has suffered for its widespread fraud and profiteering — should be rejected.

We need to hold Mylan accountable for their actions. And the government should make an example of this greedy, inexcusable corporate conduct to deter others in the pharmaceutical industry.

Let’s review what we know about the Epi- Pen so far:

The Epi-pen is an injectable device that delivers a dose of epinephrine in case of severe allergic reaction. Injectable devices have been around for many decades and the injectable “pen” was first developed in the 1970s. Originally designed for use in the military, to protect soldiers who might be exposed to chemical weapons. We later found the pen to be a life-saving emergency treatment to the most sever forms of allergic reactions.

This is important because drug companies often try to justify charging exorbitantly high prices for prescription drugs and devices because they invest heavily in research and development of new drugs. But here, the research and development that led to the Epi-pen was funded by you and me, the U.S. taxpayer.

The FDA first approved the Epi-pen for widespread commercial use in 1987. At the time, Meridian, a division of Pfizer and later Merck, was the manufacturer. In 2007, Merck sold its generic drug division, including Meridian, to Mylan.

When Mylan acquired Meridian, Epi-pen sales generated roughly $200 million in revenue. Today, the Epi-pen generates more than $1 billion in sales.

To be fair, part of Mylan’s success is attributable to its marketing efforts, which included campaigns to raise awareness of the dangers of serious allergic reactions — and, therefore, the benefits of having Epi-pens nearby. These promotion efforts also included initiatives to persuade school districts to stock supplies of Epi-pens just in case.

In these efforts, Mylan CEO Heather Bresch enjoyed the assistance of a couple of well-placed admirers. In 2012, the same year Ms. Bresch became Mylan’s chief executive, her father was elected to his first full term as United States Senator from West Virginia and her mother became head of the National Association of State Boards of Education.


Even more controversial in term of Mylan’s financial success is the fact that the company has unconscionably raised the price of its life-saving injectable drug. When Mylan acquired the Epi-Pen in

Epi-Pen Price Increase

Epi-Pen price increase since 2007

2007, the price for a two-pack was about $100. Up until Mylan and its well-connected CEO were exposed, recently, for price-gouging, they price had skyrocketed to more than $600 for a two-pack.

Add to this mix the fact that in 2014, CEO Bresch relocated her company’s headquarters to the Netherlands — a practice business types call “inversion,” perhaps as a way of disguising how unsavory this corporate tax-saving loophole really is. And the fact that Ms. Bresch pumped up her own corporate pay from about $2.5 million in 2007 to nearly $20 million in 2015.

Now, the Epi-pen is no ordinary medication. Parents of kids with severe food allergies, for example, know well the peace of mind that comes from having an Epi-pen on hand. My step-son has severe food allergies and, I can tell you, we never leave the house without one. There is one in the car and another at his school, too.

The Epi-pen truly is a life-saver. But for that privileged you’re going to have to pay a price many simply cannot afford.

Oh, and just by the way, Mylan controls 90 percent of the market for injectable epinephrine devices.

All of this brings me to the question of what to do about the fact that, during this same time period, Mylan has been cheating the federal government out of hundreds of millions of dollars. Raising its prices without rational basis wasn’t enough for Mylan. Moving to Europe to avoid paying U.S. taxes wasn’t enough. Shooting up corporate executive pay to unjustifiable levels, that wasn’t enough.

No, Mylan misclassified its Epi-pen in order to avoid paying millions of dollars in rebates otherwise owed to Medicare. In other words, Mylan overcharged the federal government — once again. That means Mylan overcharged you and me — to the tune of more than $700 million.

On October 7, 2016, Mylan announced that it had struck a deal with the Department of Justice to pay $465 million to settle any claims, including claims of criminal wrongdoing, in connection with this scam. The settlement would also include language that would make clear that Mylan was not acknowledging any wrongdoing.


Several Senators, including Elizabeth Warren (D-MA) and Richard Blumenthal (D-CT) have written to the Attorney General asking her to reject this settlement. And they are damned right.

Not only should the Department of Justice reject this settlement, but Mylan should be held fully accountable. This company should pay back every single dollar they overcharged the taxpayers and then some. Moreover, Mylan should be made an example so that other drug companies are deterred from price gouging.

We have a huge problem in this country with the high cost of health care. Its fueled in large measure by the high cost of prescription drugs. There are many and complex reasons why our health care system is in such bad shape. There are many complex theories on how to fix the problem.

When we have such a clear example of an obviously bad actor, one that is driving prices of a life-saving drug higher and higher, and when, on top of all that, this same bad actor cheats and steals from the government, why would we offer that company a deal?

Senator Charles Grassley (R-IA), chairman of the Senate Judiciary Committee, is holding a hearing on November 30 to examine the settlement and explore whether the federal government is holding the company appropriately accountable. Good.  Let that hearing lead to a rejection of this settlement. Let the hearing lead to the making of an honest and fair settlement. A settlement that holds Mylan fully responsible for its bad behavior and one that sets a good and deterring example to others in the industry.