11 ms·

EpiPen Maker Mylan Tied Executive Pay to Aggressive Profit Targets

29 points by helloworld 10y ago

rayiner 10y ago
Because no companies tie executive pay to profit targets.
- yuhong 10y ago
  But demand is inelastic and I think there is a patent monopoly.
  - rayiner 10y ago
    What does demand being inelastic have to do with anything? And the drug isn't patented.
    - yuhong 10y ago
      If demand is elastic, higher prices would result in lower sales.
    - sndean 10y ago
      The 0.3 mg of epinephrine injected by the pen probably isn't patented, but I believe that the pen is.
      - maxerickson 10y ago
        Various improvements to the pen have been patented over the years, the initial patent was granted in 1977 and is expired. The question becomes, how small an improvement should we look at and decide that it warrants exclusivity? It's a trickier question for something like the Epipen where there is benefit from widespread understanding of how to properly use it (so a change to the pen that requires different user training becomes a change that removes generics from the market).
    - ubernostrum 10y ago
      And the drug isn't patented. I've seen multiple people try to figure out why there is no competition, and some consensus around the fact that while the drug is not patented, the particular delivery device design (or combination of it and the drug) is patented, and due to issues of needing to train people on multiple different delivery devices, there's no room to break into the market with an equivalent that evades the patent concern.
      - grandalf 10y ago
        While remotely plausible, this sounds farfetched to me, considering that there would be virtually no R&D budget to deal with, and unlike chemical pharmaceuticals it is easy to test the full life cycle of the device in seconds, thousands of times in a row. Epinephrine is in the public domain, and there is no chance that flaws in the delivery device would take years to discover. So in comparison to most of what Big Pharma spends money trying to bring to market, an epi pen is (in comparison) extremely easy. My guess is that even if a patent were successfully filed for a new delivery device, the challenge lies in getting all the sweetheart deals that Mylan was able to get.
- toomuchtodo 10y ago
  Nobody dies if you can't afford Tide. People forgoing medically necessary healthcare and medication is where the problem lies with aggressive profit seeking where demand is inelastic. Now, if the US government would simply allow imports of equivalent medications and devices when this sort of rent seeking occurs (from other first world countries where the price is set through a single payer system), we wouldn't be having this conversation.
  - rayiner 10y ago
    The opposite of rent seeking is not prices set in monopsony systems.
    - toomuchtodo 10y ago
      True, but it's what's called for in what shouldn't be a marketplace: healthcare
      - tptacek 10y ago
        Why shouldn't health care be a marketplace? You can live without health care far longer than you can without food, which is, like, the canonical marketplace.
- oconnore 10y ago
  Do you actually believe that kids with peanut allergies should die, or is this some sort of economics game of chicken where you try to stick to the script longer than anyone else?
  - rayiner 10y ago
    I think we shouldn't create an incentive structure where making the next Tinder is a better way to make money than making the next Epipen. Talented drug developers aren't born any more charitably-minded than talented app-developers, and if you impose an artificial charity function on drug development you'll just drive talented people to other fields where they can make more money. Every year a ton of MIT, Stanford, and Harvard graduates go into Silicon Valley or Wall Street instead of getting a PhD in biology or physics because we've got this perverse idea that the more "important" something is the more people who go into that field should be willing to forgo material interests. "Greed is good" if you're building a Pokemon game, but "evil" if you're saving lives or feeding the world. That's backward. Obviously kids shouldn't die because they can't afford essential medicines. But that means that the government should pay for those at market rates--not that companies doing important things should take on obligations to be quasi charities.
    - oconnore 10y ago
      Yeah, I agree that the incentive structure is inverted, but 1) if the government simply buys whatever rate Mylan sets, there can be no "market rate", because the market can then bear anything at all, and 2) we have had a successful (now underfunded) model for getting smart people to innovate -- by funding projects through NSF, ARPA, and the NIH. There is room to allow Mylan to make a profit, but there is little evidence that they are reinvesting these profits in beneficial work, or attracting research talent for potentially useful projects. Spending government dollars on Mylan's ridiculous prices seems unhelpful when we have proven programs for spending government dollars much more effectively (and again, if you simply don't subsidize these prices, kids die).
      - rayiner 10y ago
sandworm101 10y ago
Companies are neutral. "The company" didn't make this decision. It was the board of directors, flesh and blood people. The board of directors was elected by shareholders. Who are the shareholders? http://investors.morningstar.com/ownership/shareholders-major.html?t=MYL http://investors.morningstar.com/ownership/shareholders-majo... Largest shareholder: Vanguard Health Care (5%) ... which is in turn owned by STAAR Alternative Catagories. https://www.zacks.com/funds/mutual-fund/quote/SITAX https://www.zacks.com/funds/mutual-fund/quote/SITAX And STAAR Alternative Cats is managed by one J Andre Weisbrod.
- DashRattlesnake 10y ago
  If the largest shareholder is a mutual fund, then the shareholders so far removed from the actual situation that I think the onus for ethical decision-making falls on the executives and the board of directors. They're the ones with the knowledge and focus to be able understand the consequences of their decisions on the people who rely on their products.
  - sandworm101 10y ago
    And when they act improperly, as these have, it is the responsibility of shareholders to get rid of them.
  - yuhong 10y ago
    I hope at least they don't depend on constantly increasing stock prices, otherwise they are likely the source of the problem in the first place.
- maxerickson 10y ago
  You should probably explain more why you think SITAX and that guy are relevant. The Vanguard Health Care Fund owns ~$1 billion of Mylan (out of $48.6 billion under management). SITAX manages around $2.7 million. I don't see why SITAX and the guy that manages it matter to this story at all. The Vanguard fund having a big stake in Mylan certainly means that lots of people have a stake in Mylan though.
- 10y ago
mxuribe 10y ago
This whole thing related to such excessive pricing for such an essential thing in life for some, so vividly shows the ugly side of capitalism.
- themartorana 10y ago
  "At the time it was granted, the award was potentially worth as much as $82 million overall to the company’s top five executives. But it would be worthless if the company—whose star product is the EpiPen—fails to achieve at least 90% of its 2018 earnings target." And let's not forget that capitalism is people, not faceless, nameless machinery. Five people promised $82m between them had their greed overshadow anything else. This was spurred on by the greed of the board that would do anything to aggressively increase profits - but put the "how" on someone else for plausible deniability. Greed is the part of capitalism that regulation stands in the way of. Too aggressively rid the system of regulation and greed will consume everything.
- grandalf 10y ago
  > the ugly side of capitalism True if you mean the thing we call capitalism in the US. The only reason the price of a $1 piece of plastic can possibly be so high is because of a very noncompetitive situation created by various cronies and abetted by regulators. Let's call it what it is. It's not capitalism, it's simply a corrupt regulatory system and firms that have learned how to exploit it to their advantage. it's nothing like a market that allows competition, and the regulation is nothing like a fair referee that allows the best player to win. Under actual capitalism, there would have been price competition and perhaps (gasp) a startup would have started selling epi pens for a reasonable price just as Google started offering massive email storage for a reasonable price, etc. While I understand the emotional reaction that it is "essential for life" (I have family members who rely upon them), let's blame what is actually at fault, laws that allow firms to do this sort of thing and prevent solutions from emerging.
  - poopsintub 10y ago
    Right, is that not exactly what is supposed to happen? Performance and profits are directly related to pay, especially when you're publicly traded.
aub3bhat 10y ago
It's interesting how clear political ties between Mylan and Democratic party are swept under the rug. Also the Mylan CEO was instrumental in ensuring that FDA didn't approve any competing products because more regulation is always good. Warren, Clinton et. al. are all Pharma funded politicians. Don't get me wrong I think Obamacare is great but had this been case related to an oil company, there would have been 20 different Vox, Atlantic articles blaming Republicans. However this time since it does not fits the optimal political pattern the outrage is far more silent.
- asdfologist 10y ago
  If that's so newsworthy, then why hasn't Fox News brought it up? I think it's pretty well known that conflicts of interest are rampant throughout the government across party lines. I don't think there's any liberal conspiracy going on here.
  - at-fates-hands 10y ago
    >> then why hasn't Fox News brought it up? They've been on it since the 23rd and have reported on it nearly every day: https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=fox%20news%20mylan%20epipen https://www.google.com/webhp?sourceid=chrome-instant&ion=1&e...
    - asdfologist 10y ago
      I think you need to reread my comment and the OP's. We're talking about reporting the pharma ties among the Democrats.
chris_va 10y ago
Investors seeking profits? The horror! Profits are what caused investors to create these companies in the first place, so without that we wouldn't have EpiPens. In this particular case, there is an anti-trust argument to be made (after the generic got pulled), but drug development is a side-effect of investors seeking maximum returns. If anyone here thinks there is a better system for drug development, I think we'd all love to hear it.
- 20yrs_no_equity 10y ago
  It's worth noting that the "generic" got pulled, but there have subsequently been several attempts to bring competitive products to the market to compete with api-pens. It's not like they have a natural monopoly. The thing that is keeping competition out of the market is the FDA. This is a product that is not exactly at the cutting edge of science so either all the competition is really incompetent (I find that doubtful) or the FDA is basically creating an artificial monopoly by keeping competition out. In my opinion, most cases where you see one company able to charge outsized prices for their products, if you scratch the surface you'll find a government created monopoly, or near monopoly (wireless spectrum is an example of this) or regulation created situation that protects one company from competition. At the very least you will not find a free market. Because in a free market, people will compete if anyone gives them even a small pricing umbrella. Even for things that require very highly refined manufacturing techniques, like drugs and electronics. Look at the cellphone market, nothing is more precisely built than a smart phone yet we have huge numbers of them in a wide variety at low cost, because the market is mostly unregulated.
  - rayiner 10y ago
    You're missing the third option: the product isn't rocket science, and the FDA isn't creating an artificial monopoly, but nobody else wants to be in the business of making a product that could kill children if it's not perfect.
    - grandalf 10y ago
      True, but the Mylan ones come in a two-pack because so often people screw up administering it or require a larger (or backup) dosage. So the bar seems to be fairly low.
rdtsc 10y ago
> The company, based in the Netherlands but managed from Canonsburg, Pa., outside Pittsburgh, has grown from a sleepy generic maker to a global player with $9.4 billion in revenue last year. Pay has grown, too. Ms. Bresch, the CEO, earned $18.9 million last year, up from $9 million in 2013. [...] Ms. Bresch was found to have wrongly claimed to have an M.B.A. degree from West Virginia University. A company based in Netherlands, managed from Pittsburgh, by a person who lied about their credentials, is now modulating the rate of asthma deaths from anaphylaxis of American children. Yap. As Hunter S. Thomson said, "in a democracy you have to be a player". She is a good player... Yet anyone dare mention nationalized medicine or price controls and that is met with pejoratives like socialism, anti-Americanism, and anti free market. "But you can't do that! You'll upset the free market Gods". Somehow we manage to keep spending trillions on things like F-35, we manage to build tanks nobody needs (http://www.military.com/daily-news/2015/01/28/pentagon-tells-congress-to-stop-buying-equipment-it-doesnt-need.html http://www.military.com/daily-news/2015/01/28/pentagon-tells...), send billions in foreign military aid to countries in the ME (Israel $3B+ and Egypt $1B). Yet anyone dare suggesting price controls for EpiPens -- and oh no, socialism will kill us all.
- grandalf 10y ago
  > anyone dare mention nationalized medicine or price controls Uh, the US medical system is full of price controls on pretty much everything that is a "service" and not a product. > Somehow we manage to keep spending trillions on things like F-35 Yes, these are a horrible and unconscionable waste of resources and blight upon the world. But the American left is just as much in favor of military excess as the American right.

29 points by helloworld 10y ago

rayiner 10y ago

Because no companies tie executive pay to profit targets.

yuhong 10y ago
But demand is inelastic and I think there is a patent monopoly.
- rayiner 10y ago
  What does demand being inelastic have to do with anything? And the drug isn't patented.
  - yuhong 10y ago
    If demand is elastic, higher prices would result in lower sales.
  - sndean 10y ago
    The 0.3 mg of epinephrine injected by the pen probably isn't patented, but I believe that the pen is.
    - maxerickson 10y ago
      Various improvements to the pen have been patented over the years, the initial patent was granted in 1977 and is expired. The question becomes, how small an improvement should we look at and decide that it warrants exclusivity? It's a trickier question for something like the Epipen where there is benefit from widespread understanding of how to properly use it (so a change to the pen that requires different user training becomes a change that removes generics from the market).
  - ubernostrum 10y ago
    And the drug isn't patented. I've seen multiple people try to figure out why there is no competition, and some consensus around the fact that while the drug is not patented, the particular delivery device design (or combination of it and the drug) is patented, and due to issues of needing to train people on multiple different delivery devices, there's no room to break into the market with an equivalent that evades the patent concern.
    - grandalf 10y ago
      While remotely plausible, this sounds farfetched to me, considering that there would be virtually no R&D budget to deal with, and unlike chemical pharmaceuticals it is easy to test the full life cycle of the device in seconds, thousands of times in a row. Epinephrine is in the public domain, and there is no chance that flaws in the delivery device would take years to discover. So in comparison to most of what Big Pharma spends money trying to bring to market, an epi pen is (in comparison) extremely easy. My guess is that even if a patent were successfully filed for a new delivery device, the challenge lies in getting all the sweetheart deals that Mylan was able to get.
toomuchtodo 10y ago
Nobody dies if you can't afford Tide. People forgoing medically necessary healthcare and medication is where the problem lies with aggressive profit seeking where demand is inelastic. Now, if the US government would simply allow imports of equivalent medications and devices when this sort of rent seeking occurs (from other first world countries where the price is set through a single payer system), we wouldn't be having this conversation.
- rayiner 10y ago
  The opposite of rent seeking is not prices set in monopsony systems.
  - toomuchtodo 10y ago
    True, but it's what's called for in what shouldn't be a marketplace: healthcare
    - tptacek 10y ago
      Why shouldn't health care be a marketplace? You can live without health care far longer than you can without food, which is, like, the canonical marketplace.
oconnore 10y ago
Do you actually believe that kids with peanut allergies should die, or is this some sort of economics game of chicken where you try to stick to the script longer than anyone else?
- rayiner 10y ago
  I think we shouldn't create an incentive structure where making the next Tinder is a better way to make money than making the next Epipen. Talented drug developers aren't born any more charitably-minded than talented app-developers, and if you impose an artificial charity function on drug development you'll just drive talented people to other fields where they can make more money. Every year a ton of MIT, Stanford, and Harvard graduates go into Silicon Valley or Wall Street instead of getting a PhD in biology or physics because we've got this perverse idea that the more "important" something is the more people who go into that field should be willing to forgo material interests. "Greed is good" if you're building a Pokemon game, but "evil" if you're saving lives or feeding the world. That's backward. Obviously kids shouldn't die because they can't afford essential medicines. But that means that the government should pay for those at market rates--not that companies doing important things should take on obligations to be quasi charities.
  - oconnore 10y ago
    Yeah, I agree that the incentive structure is inverted, but 1) if the government simply buys whatever rate Mylan sets, there can be no "market rate", because the market can then bear anything at all, and 2) we have had a successful (now underfunded) model for getting smart people to innovate -- by funding projects through NSF, ARPA, and the NIH. There is room to allow Mylan to make a profit, but there is little evidence that they are reinvesting these profits in beneficial work, or attracting research talent for potentially useful projects. Spending government dollars on Mylan's ridiculous prices seems unhelpful when we have proven programs for spending government dollars much more effectively (and again, if you simply don't subsidize these prices, kids die).
    - rayiner 10y ago

sandworm101 10y ago

Companies are neutral. "The company" didn't make this decision. It was the board of directors, flesh and blood people. The board of directors was elected by shareholders. Who are the shareholders? http://investors.morningstar.com/ownership/shareholders-major.html?t=MYL http://investors.morningstar.com/ownership/shareholders-majo... Largest shareholder: Vanguard Health Care (5%) ... which is in turn owned by STAAR Alternative Catagories. https://www.zacks.com/funds/mutual-fund/quote/SITAX https://www.zacks.com/funds/mutual-fund/quote/SITAX And STAAR Alternative Cats is managed by one J Andre Weisbrod.

DashRattlesnake 10y ago
If the largest shareholder is a mutual fund, then the shareholders so far removed from the actual situation that I think the onus for ethical decision-making falls on the executives and the board of directors. They're the ones with the knowledge and focus to be able understand the consequences of their decisions on the people who rely on their products.
- sandworm101 10y ago
  And when they act improperly, as these have, it is the responsibility of shareholders to get rid of them.
- yuhong 10y ago
  I hope at least they don't depend on constantly increasing stock prices, otherwise they are likely the source of the problem in the first place.
maxerickson 10y ago
You should probably explain more why you think SITAX and that guy are relevant. The Vanguard Health Care Fund owns ~$1 billion of Mylan (out of $48.6 billion under management). SITAX manages around $2.7 million. I don't see why SITAX and the guy that manages it matter to this story at all. The Vanguard fund having a big stake in Mylan certainly means that lots of people have a stake in Mylan though.
10y ago

mxuribe 10y ago

This whole thing related to such excessive pricing for such an essential thing in life for some, so vividly shows the ugly side of capitalism.

themartorana 10y ago
"At the time it was granted, the award was potentially worth as much as $82 million overall to the company’s top five executives. But it would be worthless if the company—whose star product is the EpiPen—fails to achieve at least 90% of its 2018 earnings target." And let's not forget that capitalism is people, not faceless, nameless machinery. Five people promised $82m between them had their greed overshadow anything else. This was spurred on by the greed of the board that would do anything to aggressively increase profits - but put the "how" on someone else for plausible deniability. Greed is the part of capitalism that regulation stands in the way of. Too aggressively rid the system of regulation and greed will consume everything.
grandalf 10y ago
> the ugly side of capitalism True if you mean the thing we call capitalism in the US. The only reason the price of a $1 piece of plastic can possibly be so high is because of a very noncompetitive situation created by various cronies and abetted by regulators. Let's call it what it is. It's not capitalism, it's simply a corrupt regulatory system and firms that have learned how to exploit it to their advantage. it's nothing like a market that allows competition, and the regulation is nothing like a fair referee that allows the best player to win. Under actual capitalism, there would have been price competition and perhaps (gasp) a startup would have started selling epi pens for a reasonable price just as Google started offering massive email storage for a reasonable price, etc. While I understand the emotional reaction that it is "essential for life" (I have family members who rely upon them), let's blame what is actually at fault, laws that allow firms to do this sort of thing and prevent solutions from emerging.
- poopsintub 10y ago
  Right, is that not exactly what is supposed to happen? Performance and profits are directly related to pay, especially when you're publicly traded.

aub3bhat 10y ago

It's interesting how clear political ties between Mylan and Democratic party are swept under the rug. Also the Mylan CEO was instrumental in ensuring that FDA didn't approve any competing products because more regulation is always good. Warren, Clinton et. al. are all Pharma funded politicians. Don't get me wrong I think Obamacare is great but had this been case related to an oil company, there would have been 20 different Vox, Atlantic articles blaming Republicans. However this time since it does not fits the optimal political pattern the outrage is far more silent.

asdfologist 10y ago
If that's so newsworthy, then why hasn't Fox News brought it up? I think it's pretty well known that conflicts of interest are rampant throughout the government across party lines. I don't think there's any liberal conspiracy going on here.
- at-fates-hands 10y ago
  >> then why hasn't Fox News brought it up? They've been on it since the 23rd and have reported on it nearly every day: https://www.google.com/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=fox%20news%20mylan%20epipen https://www.google.com/webhp?sourceid=chrome-instant&ion=1&e...
  - asdfologist 10y ago
    I think you need to reread my comment and the OP's. We're talking about reporting the pharma ties among the Democrats.

chris_va 10y ago

Investors seeking profits? The horror! Profits are what caused investors to create these companies in the first place, so without that we wouldn't have EpiPens. In this particular case, there is an anti-trust argument to be made (after the generic got pulled), but drug development is a side-effect of investors seeking maximum returns. If anyone here thinks there is a better system for drug development, I think we'd all love to hear it.

20yrs_no_equity 10y ago
It's worth noting that the "generic" got pulled, but there have subsequently been several attempts to bring competitive products to the market to compete with api-pens. It's not like they have a natural monopoly. The thing that is keeping competition out of the market is the FDA. This is a product that is not exactly at the cutting edge of science so either all the competition is really incompetent (I find that doubtful) or the FDA is basically creating an artificial monopoly by keeping competition out. In my opinion, most cases where you see one company able to charge outsized prices for their products, if you scratch the surface you'll find a government created monopoly, or near monopoly (wireless spectrum is an example of this) or regulation created situation that protects one company from competition. At the very least you will not find a free market. Because in a free market, people will compete if anyone gives them even a small pricing umbrella. Even for things that require very highly refined manufacturing techniques, like drugs and electronics. Look at the cellphone market, nothing is more precisely built than a smart phone yet we have huge numbers of them in a wide variety at low cost, because the market is mostly unregulated.
- rayiner 10y ago
  You're missing the third option: the product isn't rocket science, and the FDA isn't creating an artificial monopoly, but nobody else wants to be in the business of making a product that could kill children if it's not perfect.
  - grandalf 10y ago
    True, but the Mylan ones come in a two-pack because so often people screw up administering it or require a larger (or backup) dosage. So the bar seems to be fairly low.

rdtsc 10y ago

> The company, based in the Netherlands but managed from Canonsburg, Pa., outside Pittsburgh, has grown from a sleepy generic maker to a global player with $9.4 billion in revenue last year. Pay has grown, too. Ms. Bresch, the CEO, earned $18.9 million last year, up from $9 million in 2013. [...] Ms. Bresch was found to have wrongly claimed to have an M.B.A. degree from West Virginia University. A company based in Netherlands, managed from Pittsburgh, by a person who lied about their credentials, is now modulating the rate of asthma deaths from anaphylaxis of American children. Yap. As Hunter S. Thomson said, "in a democracy you have to be a player". She is a good player... Yet anyone dare mention nationalized medicine or price controls and that is met with pejoratives like socialism, anti-Americanism, and anti free market. "But you can't do that! You'll upset the free market Gods". Somehow we manage to keep spending trillions on things like F-35, we manage to build tanks nobody needs (http://www.military.com/daily-news/2015/01/28/pentagon-tells-congress-to-stop-buying-equipment-it-doesnt-need.html http://www.military.com/daily-news/2015/01/28/pentagon-tells...), send billions in foreign military aid to countries in the ME (Israel $3B+ and Egypt $1B). Yet anyone dare suggesting price controls for EpiPens -- and oh no, socialism will kill us all.

grandalf 10y ago
> anyone dare mention nationalized medicine or price controls Uh, the US medical system is full of price controls on pretty much everything that is a "service" and not a product. > Somehow we manage to keep spending trillions on things like F-35 Yes, these are a horrible and unconscionable waste of resources and blight upon the world. But the American left is just as much in favor of military excess as the American right.