Move Over Turing, Valeant – Mylan Next Target For Price Scrutiny

Move over Turing and Valeant. Generic and specialty drug jumbo Mylan NV may be the next pharmaceutical company to come under scrutiny by payers and Capitol Hill for jacked-up drug prices.

At least, that's what Wells Fargo analyst David Maris said in a new report – an analysis that had investors worried enough to drive shares of Mylan down by 6% on June 10.

Maris pointed out that Mylan has raised the prices of 24 of its drugs by more than 20% in the past six months, with seven medicines having their costs rocket up more than 100%.

"Mylan has taken some exceptionally large price increases in 2016," he said.

So far, most of the attention on drug price increases has focused on Turing Pharmaceuticals AG and Valeant Pharmaceuticals International Inc., even though other big pharmas, like Pfizer Inc. and Biogen Inc.., have had substantial raises in the costs of some of their medicines (Also see "Beware The 'Pitchforks,' Pharma" – Scrip, 18 Mar, 2016, "It Was Shkreli's Show, But Pharma Was On Trial" – Scrip, 05 Feb, 2016).

But Maris predicted Mylan soon could be in the bull's-eye of payers and lawmakers.

Maris noted the price for Mylan's generic version of ursodiol, which is approved in the US to treat primary biliary cirrhosis, went up 542% in the first half of 2016.

The company's price of its oral irritable bowel syndrome drug dicyclomine jumped 400% in the first six months of this year, while the cost of the firm's gastroesophageal reflux and diabetic gastroparesis medicine metoclopramide shot up 444%, Maris reported.

And the price for Mylan's overactive bladder product tolterodine – the generic drug maker's largest-selling generic medicine – rose by 56% in the past six months.

Maris also noted Mylan, which moved its headquarters last year to The Netherlands under a tax inversion scheme – allowing the company to avoid paying US taxes – has not limited recent price increases to its smaller generic drugs.

Indeed, the firm in May boosted the price by 15% of its top brand-name product EpiPen, which uses an auto-injector to administer epinephrine, a non-selective alpha and beta-adrenergic receptor agonist, to patients in emergency situations to treat allergic reactions, including anaphylaxis – an increase that followed two 15% price hikes last year.

Mylan brought in $874m in sales for EpiPen in 2015, Maris pointed out.

Mylan also twice raised the price in 2016 of its brand-name chronic obstructive pulmonary disease product Perforomist inhalational solution, a long-acting beta2-adrenergic agonist – a therapy that brought in $168.5m in sales in 2015, Maris said.

Those price hikes for Perforomist totaled an 11% increase for the drug, which Maris said was consistent with the company's actions on the product in previous years.

Mylan spokeswoman Nina Devlin, however, said Maris' "flawed analysis" that focused on only a small number of drugs "out of the more than 1,400 products" the company sells globally, 600 of which are marketed in North America, was "simply self-serving and misleading to investors."

"Mylan's business model is not today, nor has it ever been, premised on price hikes," Devlin insisted.

"Mylan has always been known to have one of the industry's broadest and most globally diversified business models and portfolios, which we have successfully managed by balancing numerous variables, including the natural price reductions that have always been inherent to the generics industry," she told Scrip in an emailed statement.

But given the current focus on pharmaceutical costs, Mylan's pricing actions could bring greater critical observation and headline risk for the company, Maris said.

"In this environment, we believe 400% and 500% price increases on products are beacons for scrutiny," the Wells Fargo analyst said.

"Overall, while these products may be small relative to Mylan's overall business, we do not believe the price increases come without a real cost to patients, and if this turns to headline risk, there could be an impact to reputation and shareholders as well," Maris said.

Because of the spikes in Mylan's prices, the US generic drug market dynamics likely will be less favorable in 2016, versus prior years, he said.

Another risk, Maris said, is that generics companies may have less political cover in the US going forward.

In addition, Mylan could pique the interests of federal investigators and be putting itself in jeopardy for probes by the Securities and Exchange Commission – something very familiar right now to Turing, whose former CEO Martin Shkreli just had a musical written about him, and Valeant – as well as lawsuits filed against the company (Also see "Life's A Musical For Martin Shkreli" – Scrip, 08 Jun, 2016, "Valeant: Another Fine Mess" – Scrip, 02 Mar, 2016, and "Antitrust Trouble For Turing? NY Opens Probe" – Scrip, 14 Oct, 2015.)

Maris wondered if Mylan's aggressive price increases were being used to make earnings per share targets or to offset disappointing sales in other areas.

He concluded that other companies in the sector represented better risk-return profiles.

Shares of Mylan closed at $44.53 on June 10, down $1.23, or 2.7%.