Crisis Management

Amid EpiPen Furor, a CEO Shows How Not to Swim Against the Tide

Amid EpiPen Furor, a CEO Shows How Not to Swim Against the Tide

Heather Bresch, chief executive officer of Mylan NV.

Image credit: Bloomberg | Getty Images
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Lifeguards know a little secret that saves lives. When a rip current is pulling you out to sea, stop fighting it and just swim parellel to beach. Soon, the current will shift and you'll reach the beach without exhausting yourself or drowning.

That's the lesson in the way drug maker Mylan NV CEO Heather Bresch has handled the outrage toward her company's pricing of the EpiPen, the quick dose of epinephrine used so frequently now by people to stop allergic reactions. Rather than swim against the current criticism, she is slowly, but purposefully, swimming along, hoping to change the narrative.

First, the background. Back in 2007, when Mylan acquired the rights to the EpiPen, a constant companion of parents with children with nut allergies or those who are allergic to bug bites, the cost was about $94, according to data from Elsevier Clinical Solutions. Nine years later, it's above $600.

Unsurprisingly, that thrust Mylan into the public rogue's gallery of "greedy" drug makers like Turing Pharmaceuticals and Valeant Pharmaceuticals who have been accused of jacking up drug prices, which keep important, life-saving treatments out of the hands of patients who need it. Profits over people, as the slogan goes.

The truth, as is often the case, is not that simple. Bresch, in an interview with CNBC, pointed out that the list price for a drug doesn't reflect what goes back to the manufacturer. As anyone who has ever sold a product knows, the end price needs to take distribution and other factors into consideration. In the case of a drug, there are additional layers that touch the product and add cost: wholesalers, distrubutors. pharmacy-benefit companies, retail pharmacies, etc. EpiPens, and Bresch says, the $608 price tag brings in $274 to Mylan. The rest goes to all the middlemen, she says.

In fact, rather than wanting to raise prices, Bresch says she wishes she could lower the cost, but she can't without risking the profits needed to keep EpiPens on the market. "No one's more frustrated than me," she told CNBC. "Everybody should be frustrated."

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So, rather than fight the mob, Mylan's crisis response has been to pick up its own torch and pitchfork and join it. That's smart, since it is difficult to fight the popular opinion that all companies -- and drugmakers in particular -- are more about profitability than patient outcomes. It isn't surprising that most of the loudest criticism has come from the Democratic side of the aisle in Congress and from Hillary Clinton on the campaign trail. (EpiPen spokeswoman Sarah Jessica Parker has also distanced herself, but I'm not sure whether that is a plus or minus, or even matters at all.) To most of these critics, capitalism has replaced Freemasons and Jesuits as the convenient villains behind every problem or conspiracy.

Mylan's spin to populism can't last unless it pivots effectively to target more villains. Pointing out the hypocricy of government at large, and Congressional critics in particular, has to be part of any plausible crisis response. Obamacare plans have higher deductibles and lower drug benefits. Those plans have played a role in our understanding of -- and sting from -- drug prices.

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Recall that pharmaceutical companies chose not to fight Obamacare in 2009 under a deal where it could have more latitude with prices. While Obamacare in theory provided coverage to millions of people who couldn't get insurance under the old system, it also made the out-of-pocket costs higher. People with private insurance (otherwise known as those folks who liked their doctors and were actually allowed to keep them) are paying the copays they've always paid for EpiPens. Many people with private insurance don't even blink about the actual price of drugs unless they aren't covered. Taking the fight to one of the causes -- the lawmakers who are heaping criticism on the company right now -- might seem risky, but, in a political season where no one trusts politicians, it helps Mylan and Bresch reshape the narrative. (Bresch, incidentally, is the daughter of one of these potential targets, West Virginia Democratic Sen. Joe Manchin.)

Riskier still, but just as necessary, is to point out how Mylan is in this position because the regulatory structure for drug pricing gives the company an unfair competitve advantage and keeps prices high. Nothing brings prices down like free-market competition, but the Food & Drug Administration has blocked or slowed most competitors to the EpiPen. I'm sure Mylan is quite happy to have the competition, but prices are a function of markets, and monopolies have a way of screwing consumers. Mylan should message to the world that it wants free-market, entrepreneurial competition to help battle the structural inefficiencies in the market and regulatory structure to bring down prices for consumers.

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Mylan and Bresch no doubt will continue to have some explaining to do, but Bresch's initial response -- a straightforward interview on a major business channel that acknowledged and supported the heart of the very criticism it faced -- is the best way to shift the narrative from the easy meme of greedy capitalist to advocate for real structural change. Changing the narrative is the first step to any effective crisis response, and there are enough bad guys to go around when it comes to the costs in our health care system. Bresch should double down on that approach and start leading the national conversation more, rather than drowning in politcally charged criticism. That would be the best prescription for Mylan, its shareholders, its patients and the American capitalist economy.