Heather Bresch, the CEO at the center of EpiPen’s 471% price hike, sold 100,200 of her shares earlier this month and earned more than $5m from the sale.
The transaction took place on 9 August, the same day Mylan – the drugmaker that manufactures EpiPen – released its most recent earnings report. Mylan spokeswoman Nina Devlin told the Guardian that the sale was “part of a 10b5 plan”. Typically, executives and directors of public companies who want to sell their stock establish a written 10b5 plan to do so. Most of 10b5 plans include a waiting period spanning days or weeks to avoid any suspicion of trading based on material non-public information. Simply put, 10b5 plans are used to avoid being suspected of insider trading.
Yet Bresch did not need insider information to know that trouble lay ahead.
Early in June, Wells Fargo analyst David Maris put together a report detailing that since the beginning of this year, Mylan raised the prices of seven of its products by 100% or more and 24 products by 20% or more. At the time, Devlin called the report “flawed”.
The report came months after Marti Shkreli, former chief executive of Turing Pharmaceuticals, increased prices of HIV medicine Daraprim 5,000%. In his attempts to defend the decision, Shkreli become notorious and was even summoned before the US Congress to justify the price hike.
As a result, in June, Maris of Wells Fargo noted that price hikes could lead to similar trouble for Mylan.
“We believe that given the regulatory environment, these pricing actions could bring greater regulatory scrutiny and headline risk,” he wrote in his analyst note.
The price hikes of Mylan’s products were covered by media outlets such as CNBC,Bloomberg and FiercePharma. Bloomberg had also previously published a featurein September 2015 detailing how Bresch had made EpiPen into a marketing success and increased its price 400%.
Over the past 12 months, price of EpiPen was hiked twice more, going up 15% each time. The last of the hikes took place after the Bloomberg story was published. Overall, since Mylan acquired Merck KGaA – the maker of EpiPen and 400 other products – its price had gone up 461%.
On 8 July, Slate ran a story with the headline: “There’s absolutely no reason why an EpiPen should cost $300”. EpiPens are usually sold in packs of two for more than $600.
A month after Slate’s story was published, Bresch sold 100,200 of her shares. The transaction took place just weeks before more coverage of the EpiPen price hike caused the Mylan share price to drop from $49 on 18 August to $42.91 on 26 August. Bresch also received a 671% pay increase over the past nine years. She still holds 828,318 shares of Mylan.
The trouble for Mylan is far from over. Earlier this week, Bresch was invited to testify before the US Senate to explain the price hike. Sarah Jessica Parker, the actor best known for Sex and the City, terminated her relationship with Mylan. Parker was previously a spokeswoman for the company, helping increase awareness of anaphylaxis – an allergic reaction that causes one’s airways to swell and close. EpiPen quickly delivers a proper dose of epinephrine to those suffering from anaphylaxis.
Similarly to Parker, Kelly Rudnicki was a paid spokeswoman for Mylan until she resigned this past Wednesday . For days, she was reading about the issue trying to make a decision.
“There is absolutely no way that I could align myself with a company that is really not taking care of its consumers,” she told the Guardian. “It was a very easy decision for me to make once I came to that conclusion.”
Rudnicki was working with Mylan for about two years, but had been a food allergy advocate and blogger for about 10 years. When she first heard that the company had increased EpiPen prices by 461%, she said she “felt like I was punched in the gut. I felt betrayed”.
“I believe the CEO must step down,” she said. “Once that trust is broken, she really cannot lead this company.”
A mother of an allergic child, Rudnicki has been buying EpiPens for the past 13 years. Since she has a high deductible, sometimes they would be covered by insurance and sometimes they were not.
There is no justification for the high prices, she said.
On Thursday morning, Bresch went on CNBC and in an interview said that one of the reasons why Mylan hiked EpiPen prices was because of the US healthcare system.
“I am hoping that this is an inflection point for this country,” she said. “Our healthcare is in crisis. It’s no different than the mortgage financial crisis back in 2007.”
According to Bresch , the price is that much higher because it has to pass through four or five “hands” such as retailers and pharmacy benefit managers before it gets to the patient at the counter.
“What Mylan takes from that, our net sales is $274, so $137 per pen,” she said.
As a result, on Thursday, Mylan announced that in addition to issuing $300 savings cards for consumers in need, it was also going to start selling EpiPens directly to consumers.