Mylan Tied Executive Pay to Aggressive Profit Target

The sole producer of lifesaving EpiPen Mylan NV has been undertaking tremendous pressure for its approval of a special incentive plan that rewards executives if they hit aggressive profit target. The program started in early 2014 with the intent of doubling company’s earnings by the end of 2018. It isn’t uncommon for public-traded enterprises to link its executive’s compensation to stock-price goal in order to prompt growth. As for Mylan, this aroused industry watchers’ concerns if the incentive program is one of the catalysts that paved way for the Epipen’s prices hikes in recent years. More than 90% of Mylan’s revenues are derived from general drugs, a highly fragmented and saturated market. Meanwhile, revenues from the EpiPen boosted the specialty segment of the company by 17%, as reported in Mylan’s first quarter earnings report. As the product became the executive’s key mechanism in meeting the company’s aggressive targeted profit, patients have been paying more and more out of their pockets to stay alive.

EpiPen is an auto-injector consisting of epinephrine that is commonly used by households and school medical services to delay severe allergic reactions. Mylan acquired EpiPen in 2007, originally selling the product at $57 per injector. Since then the price has risen steadily, appreciating over 600%, to arrive at $300.

Besides the incentive program, EpiPen’s lack of competition may have also played a consequential role in this steep price increase. Sanofi, the manufacturer of rival device Auvi-Q, entered the market in 2013. However, the company struggled in 2014 to gain insurance coverage and was pulled off the market in late October 2015. Auvi-Q remains off the market today, thus reducing the competition even more. EpiPen’s prices continued to increase when Teva Pharmaceutical Industries, Mylan’s other competitor, saw delays in its FDA application for a generic version of EpiPen.

By: Skylar Le

Wall Street Journal

Bloomberg

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