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Do Mylan shareholders want the CEO to keep raising the price of the EpiPen?

Do Mylan shareholders want the CEO to keep raising the price of the EpiPen? We don’t know yet.

Investors like a company to deliver positive earning results and increased guidance, and the recent negative public opinion has given investors a reason to sell, which was what happened. Currently $MYL is in “oversold” territory.

Mylan 1 year and 5 year trends:
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Keep in mind that 68% of Mylan is institutionally owned. Thus the market makers’ decisions will determine whether “shareholders” truly want the CEO to keep raising prices of the EpiPen. Retail (individual) investors’ outrage makes little difference to $MYL stock price, unless you happen to be an individual who owns millions of shares of $MYL.

I suspect that there is a sweet spot that is not being discussed, which is, the institutional investors want to ensure that the EpiPen continues to dominate the market (which is temporarily the case, given the set backs of potential major competitors) but also not be priced to the point where backlash from the reimbursement side triggers costly events.

If $600 is too much for public opinion to stomach, what about $500? $400? It’s not so much about what the “real” price ends up being on the consumer-side, but the publicity around the price itself, as well as the defense of the price by a CEO who hasn’t been successful pitching the coupon/assistance angle. That’s about as effective as a U.S. private university saying, “Sure, our tuition is $65,000 a year, but our students almost never pay full price!!!”

SOMEONE is absorbing the escalating cost of a life-saving product, and we’ve been around the block long enough to know that at the end of the convoluted cost justification conveyor belt, we consumers will end up getting bitten on the butt.

Entities investing in businesses can claim an interest in public good, but only based on the extent that the cost/risks from actual (lawsuits, sanctions, blacklists) or perceived (bad PR) harm not exceed the revenues earned from pushing-moral-envelope decisions.

Once that risk begins to overshadow the rewards, you will see major shareholders send a message by selling $MYL shares. Then we can say for sure whether shareholders want the CEO to keep raising prices. Even Turing and Valeant had their glory days of astronomical stock prices, so you can’t say that shareholders aren’t enamored by questionable business practices, at least in the short term.

It’s all about risk:reward.

Update 8/29/2016

Within a week of the public outrage, Mylan will Launch Cheaper Generic EpiPen Alternative. Sounds like a good response, until you consider the fact that Mylan’s ability to launch this generic version in “several weeks after labeling revisions” means Mylan has always had within its capacity to offer a more affordable product (keep in mind, the generic version is still a 300% price hike from the original $100 tag). When was Mylan ever going public with this generic?

Also in question is 1) the growing public awareness of the CEO’s 600%+ hike in compensation that is being linked to the company’s pricing “strategy” and 2) less public awareness of the CEO selling 100,2000 shares of company stock at $50/share for a gross $5,010,000 after the earnings report, but before the price hike frenzy (SEC FORM 4). You can’t convince me that any executive shrewd enough to get to a C-level position can’t foresee the possible public backlash to a 600% price hike of a cheap drug delivered in the medical device that is really the main “product”.

The fact that Mylan did this in response to negative publicity reinforces the public perception that the pharmaceutical industry does indeed have “affordable alternatives” but chooses to withhold them to the public to rake in more profits. Even though reality is what Bruce Booth wrote in Forbes (Innovators vs Exploiters: Drug Pricing And The Future Of Pharmaforbes.com), where differential pricing exists for the industry to offset the steep discounts in other countries by making “countries that can pay”, pay much, much more.

The average consumer is not going to care to understand the complex pharma industry supply chain or convoluted regulatory maneuvers. The consumer knows that healthcare is at a tipping point that somehow hasn’t been tipping in the right direction, and industries like pharma spending a lot of money lobbying and advertising. More and more, social media is enabling consumers to coalesce into groups and transform into activist voices that can change how companies make decisions.

This means the pharmaceutical industry should start paying attention to actually educating consumers on the brutal realities of opaque drug pricing versus perennially showcasing the bloating belly of “cost of discovering and bringing drugs to market.” Let’s face it, that argument has not convinced the public on why drugs cost so much, and it’s a failed strategy. The industry needs to spend money on what actually works to engage consumers, not on new versions of the same graphs that had thus far convinced few and far between.

Updated: October 29, 2016 — 5:55 pm

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