Chaffetz, Cummings Request Further Details on EpiPen Profits
Chaffetz, Cummings Request Further Details on EpiPen ProfitsLetter requests detailed financial information on sales, profits, costs, etc.
WASHINGTON, D.C. – Today, House Oversight and Government Reform Committee Chairman Jason Chaffetz (R-UT) and Ranking Member Elijah Cummings (D-MD) announced that they sent a letter to Mylan CEO Heather Bresch requesting information related to the company’s EpiPen profit margins. The letter also outlines other documents Bresch agreed to provide the Committee during a September 21st hearing. Key excerpts from the letter: "This week… the Committee learned that your testimony omitted key tax assumptions that affect the company’s profit per pack. Specifically, neither your testimony, nor the documents Mylan produced to the Committee, clearly disclosed that the company’s profit claim was calculated after factoring in the statutory U.S. tax rate—37.5 percent. … "Failing to disclose tax assumptions that formed the basis for the $100 profit per pack claim, despite opportunities to do so before and during the hearing, raises questions. During the hearing, Chairman Chaffetz noted that Mylan’s 'dumbed down financials' did not make sense without explanation. Ranking Member Cummings similarly stated, 'You know, your numbers don’t add up. … And it is extremely difficult to believe that you are making only $50 profit when you just increased the price by more than $100 per pen.’” Full text of the letter can be viewed here, or below:
September 30, 2016
Ms. Heather Bresch Chief Executive Officer Mylan, Inc. Robert J. Coury Global Center 1000 Mylan Boulevard Canonsburg, PA 15317
Dear Ms. Bresch:
When you appeared before the Committee on September 21, 2016, at a hearing on Mylan’s price increases for the EpiPen, you repeatedly stated that Mylan makes $100 profit per every EpiPen two-pack that it sells.[1] This week, however, the Committee learned that your testimony omitted key tax assumptions that affect the company’s profit per pack. Specifically, neither your testimony, nor the documents Mylan produced to the Committee, clearly disclosed that the company’s profit claim was calculated after factoring in the statutory U.S. tax rate—37.5 percent. The Washington Post reported:
Lawmakers were skeptical last week when Mylan chief executive Heather Bresch said that the company made only $100 in profit for a two-pack of EpiPens. During a House hearing, Bresch repeatedly referred to a poster board showing how little of the $608 list price trickled back to the company. The incredulity was warranted: The profits Bresch told Congress about were calculated after factoring in the 37.5 percent U.S. tax rate, according to a filing with the Securities and Exchange Commission first reported by the Wall Street Journal. That tax rate is more than five times the overall tax rate the company actually paid last year and much higher than its actual U.S. tax rate, which tax specialists have pegged at close to zero. Before taxes, the EpiPen profit is actually $160 for a two-pack.[2]
Mylan claimed an estimated tax impact of $187 million for EpiPens in 2015.[3] That estimate is nearly three times Mylan’s company-wide income tax provision that year—$67.7 million—as reported in its annual SEC filing.[4] That figure reflected $93.6 million in non-U.S. taxes offset by a U.S. tax benefit of $25.9 million.[5]
During your testimony, you frequently referred to a graphic, titled “EpiPen Auto-Injector Estimated Profitability,” which identified Rebates & Allowances, Cost of Goods Sold, and Direct EpiPen Auto-Injector Costs as factors that lowered the profitability of the EpiPen.
The graphic made no mention of taxes or the tax assumptions used by Mylan to estimate the $100 profit number. Neither did your written testimony. The only time you mentioned taxes during the hearing was to disclose that Mylan’s company-wide effective tax rate is between 15 and 17 percent, as a result of Mylan’s decision to move its headquarters overseas.[6]
Failing to disclose tax assumptions that formed the basis for the $100 profit per pack claim, despite opportunities to do so before and during the hearing, raises questions. During the hearing, Chairman Chaffetz noted that Mylan’s “dumbed down financials” did not make sense without explanation.[7] Ranking Member Cummings similarly stated, “You know, your numbers don’t add up. . . . And it is extremely difficult to believe that you are making only $50 profit when you just increased the price by more than $100 per pen.”[8]
In response to scrutiny after the hearing, Mylan clarified that the profit figure you presented to the Committee included taxes.[9] In conjunction with Mylan’s SEC filing, a Mylan spokesperson stated that “the information provided to Congress has made clear that tax was part of the EpiPen Auto-Injector profitability analysis.”[10] Mylan had not directly referenced the tax assumptions for its EpiPen profit estimates, neither in its September 15, 2016, letter to the Committee, nor in the documents that the company produced.
To help us understand the manner by which Mylan prepared and provided information to the Committee and the pricing of the EpiPen, please respond to the following documents and information as soon as possible, but no later than October 7, 2016.
When producing documents to the Committee, please deliver production sets to the Majority Staff in Room 2157 of the Rayburn House Office Building and the Minority Staff in Room 2471 of the Rayburn House Office Building. The Committee prefers, if possible, to receive all documents in electronic format. An attachment to this letter provides additional information about responding to the Committee’s request.
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The Committee on Oversight and Government Reform is the principal oversight committee of the House of Representatives and has broad authority to investigate “any matter” at “any time” under House Rule X. Please contact Natalie Turner or Sarah Vance of the Majority Staff or Alexandra Golden with the Minority Staff at (202) 225-5074 with any questions about this request. Thank you for your prompt attention to this matter
[1] Reviewing the Rising Price of EpiPens: Hearing before the H. Comm. on Oversight & Gov’t Reform, 114th Cong. (Sept. 21, 2016), available at /hearing/reviewing-rising-price-epipens-2/.
[2] Carolyn Y. Johnson, Mylan’s Profits are 60 Percent More Than It Told Congress, Wash. Post, Sept. 26, 2016.
[3] Mylan N.V., Form 10-K (Feb. 16, 2016), available at https://files.shareholder.com/downloads/ABEA-2LQZGT/2909579967x0xS1623613-16-46/1623613/filing.pdf.
[4] Id.
[5] Id.
[6] Id.
[7] Reviewing the Rising Price of EpiPens: Hearing before the H. Comm. on Oversight & Gov’t Reform, 114th Cong. (Sept. 21, 2016), available at /hearing/reviewing-rising-price-epipens-2/.
[8] Id.
[9] Mark Maremont, Mylan’s EpiPen Pretax Profits 60% Percent Higher Than Number Told to Congress, Wall St. J., Sept. 26, 2016.
[10] Carolyn Y. Johnson, Mylan’s Profits are 60 Percent More Than It Told Congress, Wash. Post, Sept. 26, 2016.