Mylan’s EpiPen Pretax Profits 60% Higher Than Number Told to Congress

Mylan NV on Monday clarified the profit it said it made from its lifesaving EpiPen drug, days after House members badgered the company’s CEO to justify the device’s steep price increases.

Testifying before a congressional committee last week, CEO Heather Bresch said Mylan’s profit was $100 for a two-pack of the injectors, despite a $608 list price.

But in response to questions from The Wall Street Journal, Mylan said Monday that the profit figure presented by Ms. Bresch included taxes, which the company didn’t clearly convey to Congress. The company substantially reduced its calculation of EpiPen profits by applying the statutory U.S. corporate tax rate of 37.5%—five times Mylan’s overall tax rate last year.

Without the tax-related reduction, Mylan’s profits on the EpiPen two-pack were about 60% higher than the figure given to Congress, or $166, it said in a new regulatory filing to the Securities and Exchange Commission Monday. The company said it expects to sell about 4 million EpiPen two-packs in the U.S. this year.

Mylan said it now has provided the House Government Oversight Committee slightly changed and more detailed figures on its EpiPen profits, clarifying that the profit estimate was after taxes.

Mylan’s explanation left some analysts scratching their heads.

Mylan CEO Heather Bresch responds to questions from the House Oversight Committee regarding costs of the EpiPen. The company raised the list price of the allergy medication 548% over the last nine years, reigniting public outrage over drug prices. Photo: Getty
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.

Mylan had a 7.4% overall tax rate last year, he said, and a negative effective tax rate in the U.S. due to a negative provision for deferred taxes.

“That implies this notional [$100] profit figure also has nothing to do with reality,” Mr. Baum said.

In a statement, the company called the inclusion of a statutory tax rate for the product—in this case the U.S. corporate rate—“standard” in single-product profit analysis. It also said it didn’t include corporate expenses, which would have further reduced EpiPen’s profitability, and called its calculations “appropriate and conservative.”

‘It just feels like you’re not being candid and honest with Congress.’
—Rep. Jason Chaffetz (R-Utah) during last week’s hearing
Ronny Gal, an analyst at Sanford C. Bernstein, said Mylan “in a way” is correct to apply a statutory U.S. tax rate. “If EpiPen was its own company, it would be taxed at 37.5%. It’s just that it’s being taxed at a much lower rate” because of corporate tax-reduction strategies.

In its filing Monday, Mylan said its after-tax calculation wasn’t done according to generally-accepted accounting principles and the estimated tax impact on EpiPen profits “was not directly derived from Mylan’s reported results.”

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