Mylan Labs (NYSE:MYL), the Pittsburgh-based pharmaceutical giant at the center of a major drug pricing storm over the EpiPen, managed to pull off a tax-ducking corporate inversion just a year and a half ago.
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And now the FOX Business Network has learned that allergy advocates are preparing to use the inversion strategy to convince lawmakers to investigate the company’s EpiPen.
“I definitely think Congress needs to get involved. There needs to be an investigation,” Robyn O’Brien, founder of Allergy Kids Foundation told FOX Business Network.
O’Brien represents millions of families in America who depend on EpiPens to save lives in the case of deadly exposure to allergens. The EpiPen is an auto-injector device that delivers epinephrine, the drug that counters the effects of a fatal allergic reaction. When Mylan bought the company that manufactures the EpiPen back in 2007, the cost for a single EpiPen was $57 dollars.
Today, just 9 years later, the cost has skyrocketed to as much as $700 for a pack of two. Many insurance companies cover some or most of the cost; however, millions of children of families who cannot afford insurance must be covered by Medicare which is paid for by the American taxpayer. Others saddled with high deductibles find themselves shelling out thousands of dollars for just a few packs of the device.
Rage Over Tax Trick
Mylan’s corporate inversion could now be used as a weapon against it.
Known officially as Mylan N.V., Mylan bought the small generic specialty drug arm of Abbott Labs (NYSE:ABT) in early 2014. That estimated $5 billion dollar purchase enabled the much larger Mylan (which has a current market cap of $24 billion dollars) to ‘move its headquarters’ to the Netherlands, a more tax-friendly country.
Mylan was able to complete one of the last corporate inversions before Congress, President Obama and Republican presidential nominee Donald Trump launched a full court press to demonize the practice which involves Company A (in this case Mylan) buying Company B (usually based in a foreign country with a lower tax rate) in order to lower Company A’s tax bill.
In Mylan’s case, it appears the company moved its corporate address to the Netherlands, but still maintains most of its offices in a suburb of Pittsburgh, PA, enjoying the benefits of taxpayer-funded police, fire and other city services.
President Obama has lashed out against the practice of inversion, calling it “one of the most insidious tax loopholes out there.” Trump, too, has ripped corporate inversions, calling them a “huge problem.” What makes the Mylan case so problematic is that the company CEO Heather Bresch is the daughter of Democratic Senator Joe Manchin of West Virginia. Democrats, led by Democratic presidential nominee Hillary Clinton, have loudly denounced corporate inversions.
“They’ve built the business model on the backs of our kids, moving the headquarters to the Netherlands to avoid paying taxes into the US and as her own father said, something like that should be illegal,” said O’Brien.
Calls by FOX Business to Mylan’s press department were not returned.
Complaints about onerous price hikes in the pharmaceutical industry are age-old and often go unanswered by the companies who hold the patents. As patents expire, generic drug companies often jump in. But oddly, Israeli-based Teva Pharmaceuticals (NYSE:TEVA) attempted to present a generic version but was soundly swatted down by the FDA which cited “certain major deficiencies” to Teva’s product. O’Brien smells a rat.
“There is no competition. They have a monopoly. The barriers to entry are really high and right now there’s a low cost alternative trying to work its way through the FDA. I’ve been in this for 11 years. We’ve seen Twin-ject come and go, Auvi-Q (by Sanofi US) come and go.. Auvi-Q was recalled because of 26 unconfirmed reports. There needs to be an investigation into how (Mylan) has been able to maintain this monopoly that it has and yes, these are life saving devices but they can come in a lot of different forms and a healthy marketplace means healthy competition,” said O’Brien.
For now, Mylan has remained relatively silent after issuing an initial statement blaming insurance companies, co-pays and deductibles while offering coupons of $100 for the device.
Investors, however, have done anything but remain silent.
Milan shares fell 4.7% during Tuesday’s session and have lost 11% over the past 12-months.