HEATHER BRESCH, JOE MANCHIN’S DAUGHTER, PLAYED DIRECT PART IN EPIPEN PRICE INFLATION SCANDAL
Category: News & PoliticsVia: hallux • one month ago • 10 comments
By: Ryan Grim
HEATHER BRESCH, the former president and CEO of the drugmaker Mylan, worked directly with the CEO of Pfizer to keep prices of the company’s EpiPen product artificially high, according to new documents released as part of an ongoing lawsuit.
The documents also show Bresch approving a scheme to force customers, captured by the company’s monopoly, to purchase two EpiPens at once, regardless of medical need. The EpiPen is an auto-injectable device that injects epinephrine into the body and can be the difference between life or death for a person suffering a severe allergic reaction.
The documents were released as part of an ongoing antitrust suit in federal court. In June, Judge Daniel Crabtree issued a summary judgment partially siding with Mylan and partially siding with the plaintiffs, meaning the case goes on. Late last week, the judge unsealed some of the documents underlying the plaintiffs’ case.
Among the documents is an email sent on behalf of Bresch, who is the daughter of Sen. Joe Manchin, D-W.Va., to her counterpart at Pfizer, then-CEO Ian Read. In the email, sent in January 2011, Bresch confirms a previous discussion with Read in which she says that the two agreed that as part of a deal, Pfizer would disinvest from its EpiPen competitor, Adrenaclick. Eliminating its main competitor would then allow Mylan to continue raising its prices.
In 2007, when Mylan acquired rights to market the drug from Merck (by buying its specialty pharmaceuticals subsidiary Dey ), a two-pack cost less than $100, a tiny fraction of what it costs today. The result of the deal with Merck was that Mylan manufactured part of the EpiPen delivery system, but not the medication itself, while owning the brand name and the right to distribute the whole product. The drug itself was produced by King Pharmaceuticals, which manufactured it exclusively for Mylan.
King in 2010 announced it would be purchased by Pfizer, which was licensed to sell Adrenaclick, an EpiPen competitor, the previous year. The deal between Pfizer and Mylan led the former to withdraw its competitor from the market and partner with Mylan on Epipen, locking down a monopoly. Following the deal with Pfizer, Mylan drove the price above $600 within five years. Meanwhile, Gayle Manchin, Bresch’s mother, lobbied states to require schools to stock epinephrine as the head of the National Association of State Boards of Education. Gayle Manchin was recently confirmed to serve as co-chair of the federal Appalachian Regional Commission , a government agency tasked with promoting economic development across the region’s 13 states.
The email, sent on behalf of Bresch by her assistant, includes the subject line “Our discussion.”
I’m sending you this email as a reminder that you were to send me confirmation relative to our discussion regarding EpiPen. In that discussion, you indicated that you would be divesting your Adrenaclick product once the Pfizer/King deal closes. I understand your tender offer is closing today, so I would appreciate receiving your response as soon as possible.
Bresch did not respond to a request for comment, but Mylan has consistently said that it has done nothing wrong in how it sets the price of its EpiPens. In 2016, Bresch testified before Congress about the price increases and expressed some limited regret that some customers had paid the full list price, while noting that many others paid less due to agreements with insurance companies and pharmacy benefit managers. “Looking back, I wish we had better anticipated the magnitude and acceleration of the rising financial issues for a growing minority of patients who may have ended up paying the full price or more,” Bresch said. “We never intended this.”
AMID NEWS OF the King acquisition, Mylan, according to market analyst reports at the time, was worried that Pfizer would push ahead with its generic version and also cut Mylan out of the market. In 2010, EpiPen was dominant, controlling 91 percent of the worldwide market and 96 percent of the U.S. market, according to its filings with the Securities and Exchange Commission, but Adrenaclick was climbing quickly in market share.
A Mylan deal with Pfizer would enrich both companies: By divesting from Adrenaclick and continuing to allow Mylan to sell the EpiPen at inflated prices, both firms would split the profits from the more expensive version, allowing Pfizer to earn more than if it drove down prices with its cheaper version.
With the monopoly locked down, Mylan made its next move, a plan to eliminate its single-pack EpiPen in the United States and instead require customers to purchase two pens at once. The monopoly had created space for the new scheme, and the new scheme created extra revenue that Mylan split with Pfizer — thus entrenching the monopoly and warding off generics — and also set aside to dole out as rebates to third parties who might complain, according to the internal correspondence. The two schemes were separate but mutually reinforcing.
The idea to eliminate the single pack was batted around internally in late 2010 and early 2011, according to emails produced as part of the suit. Mylan executive Bruce Foster proposed the idea as a way to “double revenue” and create a “strong potential generic defense.” By January 2011, it had become dubbed “Project X2” or “Project Times Two,” and executives spent the next several months executing it.
The company’s executives cited no medical justification as the purpose for the change at the outset of the project and later sought to generate one.
Ivona Kopanja, an associate project manager in Mylan’s marketing and sales operations division, wrote to two other employees in March 2011: “Senior management is having a meeting with Heather April 1 and wanted to provide her with an update on Project X2. I know that you were working on creating a ‘medical’ rationale for Project X2? I’m pulling a slide deck together that will be used. Would you be able to forward me the information I should include for the rationale (and the way it should be worded)?”
In May, the company’s medical professionals raised concerns that the plan did not align with medical guidance, according to an email COO Lloyd Sanders sent to Bresch. But after Bresch “learned that the co-pay that ‘most’ patients pay is the same for a single as it is for a two-pack, she became VERY motivated to pull the singles,” according to an email from Sanders that was not released publicly but quoted by the judge in the recent opinion.
The company also conducted market research and concluded that since it was a matter of life and death, customers would suck it up and buy two pens if that was the only choice. Marketing material disclosed as part of the lawsuit includes a number of quotes from caregivers, physicians, and others making that point.
By May, the emails indicate, Mylan had begun pitching Pfizer on the project, suggesting that it could become a billion-dollar brand if done right. Bresch continued pushing the idea through June, and in July, the two companies met. “The team met with Pfizer,” wrote Sanders, “they are completely on board.”
Mylan executives told Pfizer that the scheme would likely succeed because EpiPen revenue was “‘below the radar’ for most managed care organizations,” according to an email released as part of the judge’s recent order. The judge’s order also quotes from Bresch’s deposition, in which she said Mylan didn’t “persuade … Pfizer on anything,” and called the latter company a “partner in the product.”
In August 2011, the EpiPen single pack was eliminated in the U.S., as the executives watched for public blowback. Mylan concluded there was no “need to call/write FDA,” as “it’s not necessary and will raise more questions than we have answers,” according to an email quoted in the order.
On August 20, 2011, Pfizer announced it was discontinuing its EpiPen competitor. A note from a Needham & Company analyst announcing the news observed that Adrenaclick “recently hit a peak share of 10 percent of the epinephrine market,” cutting into EpiPen’s dominance from a year earlier, when all competitors had been at just 4 percent. Pfizer executives forwarded the note with the subject line “One Less Risk to Worry About; EpiPen Wannbe [sic] from Greenstone Discontinued,” referring to the division of Pfizer that owned Adrenaclick. The email was sent around by Joanne Van Deusen, director of business operations for Pfizer, according to correspondence unsealed as part of the suit.
James Cannon, vice president for generic business alliances for Greenstone, asked an assistant to send the note on to “Dennis.” The assistant forwarded it to Dennis O’Brien. O’Brien had previously been president of King Pharmaceuticals Canada and was by then serving as Meridian Medical Technologies, the division of Pfizer that partnered with Mylan to produce the EpiPen. O’Brien subsequently forwarded the news to Tom Handel, senior vice president for commercial pharmaceuticals at Meridian.
By October, Mylan moved to raise prices. “Harry, Ron, Joe, Mike, and I are recommending a price increase now for EpiPen. The original plan was to increase in Dec or Jan assuming there was no backlash from Project X2 at payers. Project X2 implementation has been w/o ANY issues. Last price increase was May 2011. No push back on that either,” Sanders, the COO, wrote to Bresch. “The incremental sales … would be $5.5M – $6.0M and it all drops to the bottom line.” The price surged steadily in the years that followed.
Pfizer, while denying wrongdoing, has since settled a class-action suit for price fixing and will pay $345 million over the company’s practices related to the EpiPen market. A suit against Mylan, which also denies wrongdoing, is ongoing, and Bresch has faced scrutiny in the past for the company’s pricing of the lifesaving drug. In 2019, Mylan officially merged with Pfizer’s Upjohn unit to form a new company, Viatris, and Bresch began the process of stepping down, taking with her a $37.6 million exit package . She retired from Mylan in December 2020.
Bresch had been named chief operating officer of Mylan in October 2007, a promotion that immediately sparked a scandal when the Pittsburgh Post-Gazette reported that her claim of having a master’s degree in business administration from West Virginia University was false. Bresch’s father Manchin was the state’s governor at the time, and the school soon corrected the paper, saying that she had indeed obtained the degree. A subsequent investigation concluded that the initial answer had been right: Bresch had been far short of a degree, and university administrators fabricated grades to get her over the line, leading to multiple resignations from the university’s senior leadership. Manchin was elected to the Senate in 2012.
Manchin last week urged Democrats to take a “strategic pause” in consideration of the party’s $3.5 trillion reconciliation package, the centerpiece of the Biden agenda. A key component of the bill would lower drug prices by allowing Medicare to negotiate directly with pharmaceutical companies. That market power would save the government and patients billions over the next decade, but perhaps even more importantly, it would give the government greater insight into how pharmaceutical executives set prices. The change could reveal the type of collusion that keeps those rates high, exposing companies to risk of regulation or prosecution.