A group of shareholders wants the company's directors gone.
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The EpiPen injector is a life-saving device. It's also a relatively simple one, containing a small amount of inexpensive medication that treats anaphylaxis from food allergies. Life-saving and easy to produce—yet from 2009 to 2016, the EpiPen's price spiked from a little more than $100 to more than $600.
That shocking increase drew unwanted attention to its manufacturer, Mylan, which scrambled to explain itself to Congress. Investigators started looking more closely at its books, which lead to a $465 million settlement with the federal government for overcharging Medicaid. Then a US senator suggested the government was overcharged more like $1.27 billion.
As an emblem of drug-company greed and callousness, Mylan isn't quite on par with "pharma bro" Martin Shkreli, but it's close. The latest move to tarnish its reputation? Paying its chairman and former CEO $98 million last year, including a $1.6 million salary, $20 million bonus, $50.8 million in stock awards, and $22.7 million in "other compensation." And it's provoked a shareholder revolt.
An advisory firm called Institutional Shareholder Services is urging investors to give the boot to all the company's existing directors at the company's June 22 annual meeting, claiming they ignored warning signs ahead of the EpiPen controversy. After that debacle, directors still greenlit what the ISS called "outsized compensation" for former CEO Robert Coury while Mylan was losing billions of dollars in value. Another advisory firm, Glass Lewis, roasted Coury's "colossal pay package."
It's a neat synergy of two hot-button issues: executive pay and drug-company price gouging. The shareholder groups argue that, despite warnings, Mylan pursued a risky pricing strategy for years. It turned a tidy profit while doing so—one that now looks greedy. Once there was public uproar, the company tried to hide behind vague hand-waving about the complexities of healthcare supply chains. While Mylan's reputation was taking a beating, and the company was under intense government scrutiny, the board decided to shower its former CEO with millions.
Mylan has responded by defending Coury and saying its board "has overseen a period of strong and sustainable long-term growth." It also says ousting the board would leave the company without leadership.
Whether those arguments will sway two-thirds of shareholders to vote in favor of ousting directors remains to be seen, so the advisory groups face an uphill battle. And for those of us who aren't holding Mylan stock, it might be hard to see why this matters. But Americans are increasingly frustrated with the state of healthcare in this country, as the ongoing debate over Obamacare makes clear. Shareholder actions are one way of forcing accountability on the companies profiting from that care. Starting, perhaps, with the one that raised prices on a life-saving device by almost 500 percent, then gave its former CEO a $98 million payday.
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