Mylan’s EpiPen plan: schools today, everywhere tomorrow

Mylan made a fortune, and stirred controversy, while getting EpiPen allergy shots stocked in schools across America.

Now the drugmaker wants to sell EpiPens to restaurants, sports venues and potentially even Boy Scout troops - by setting up its own pharmacy to cut out middlemen and lobbying for new laws that could expand sales of its biggest product.

The plan, obtained by Bloomberg News through public records requests, would bypass small-town pharmacists and chains such as CVS and Walgreens and let Mylan sell the drug directly to public places. The company is looking to revitalize EpiPen sales that began slumping last summer, when Congress questioned Mylan over EpiPen's six-fold price increase since 2007.

'It's extremely smart,” said Mark Baum, founder and CEO of San Diego-based Imprimis Pharmaceuticals Inc., which supplies drugs directly to patients. 'There's no rationale for other middlemen getting in the way. That's just driving up the cost to customers.”

Sales of EpiPens fell in the third quarter as the $600 price tag sparked a furor that included questioning of CEO Heather Bresch by a congressional committee. Since mid-August, shares have fallen about 20 percent.

Last month, Mylan said it would cut less than 10 percent of its employees.

Mylan declined requests for interviews with executives, but Bresch has made no secret of its strategy to push for state laws to allow so-called entity prescriptions - drugs sold to places rather than people.

'We are continuing to open up new markets, new access with public entity legislation that would allow restaurants and hotels and really anywhere you are congregating, there should be access to an EpiPen,” Bresch said at a September 2015 conference.

In October, Mylan said it reached a $465 million settlement with the U.S. government over accusations it overcharged the Medicaid program by classifying EpiPens as generic instead of brand-name drugs to pay lower discounts.

Mylan's new business plan could revolutionize an industry whose layers of middlemen, critics say, cost customers money. The country's more than 600,000 eating and drinking establishments, plus thousands more sports venues, amusement parks and movie theaters, could be a gold mine for Mylan.

More than 15 million Americans have food allergies, and a severe reaction sends a patient to the emergency room about every three minutes, according to Food Allergy Research & Education.

In 2015, EpiPens brought in $912 million with an operating profit of $498 million, Mylan said in a regulatory filing. If half America's restaurants bought an EpiPen two-pack each year at a full price of $608, Mylan would generate about $180 million more in annual sales.

Last month, the company began selling an authorized generic two-pack for $300.

EpiPens, which deliver shots of epinephrine that can stop severe reactions to bee stings and food such as peanuts and shellfish, have been provided free to 67,000 U.S. schools, Mylan said. Schools also can buy additional EpiPens at a discount.

Laws in 48 states allow schools to stock and administer epinephrine injectors. Mylan spent about $4 million in 2012 and 2013 to help get federal legislation passed to encourage states to stock the devices in schools, according to lobbying disclosure forms filed with the House of Representatives.

Now the company is trying to replicate that campaign. Since 2013, Mylan has funneled thousands in campaign contributions to state lawmakers, according to campaign finance disclosures and documents posted on Mylan's website. Already, at least 30 states permit entity prescriptions beyond schools.

Before Mylan's involvement, no states had enacted such legislation, the company website says.

Ohio State Rep. Christina Hagan, who sponsored a bill there, received a $1,000 donation from Mylan last year. Hagan said working as a waitress taught her the gravity of food allergies.

The Republican said she was unaware of Mylan's campaign contribution. The bill was unanimously approved.

Frank Minear, owner of Frank's Family Restaurant in Alliance, Ohio, said he plans to buy an EpiPen because he has shellfish and items containing peanuts on the menu. While most severe allergic reactions happen at home, six percent occur at restaurants, according to a 2014 study.

'I look forward to being one of the first restaurants in Stark County to supply the EpiPen in case it's needed,” Minear said. 'It's a lifesaving thing.”

Mylan said its pharmacy, Mylan Health Management, would be used to distribute EpiPens only to entities and not to individuals, according to the company's pharmacy license applications obtained by Bloomberg News.

Mylan first disclosed the existence of the unit in a securities filing last year, without providing any details, and Umer Raffat, an analyst at Evercore ISI, reported on it in October. The pharmacy was created for 'future opportunities” and isn't operating, Mylan spokeswoman Nina Devlin said in an email.

Prescriptions to restaurants and other entities likely would be cash purchases, so Mylan wouldn't have to pay rebates to drug-benefit managers as it does for prescriptions covered by insurance.

And with its own pharmacy, Mylan could keep the entity prescriptions from migrating to cheaper generic competitors that might emerge in the future. Its website describes a new 'Mylan On Location” program to help businesses 'offer immediate care in emergency situations.”

Mylan might save $40 to $55 in pharmacy and distributor fees on each $600 EpiPen prescription, according to Michael Rea, CEO of Overland Park, Kan.-based Rx Savings Solutions. By cutting out middlemen, Mylan 'can offer an EpiPen for $200 or $250, give the market a $350 discount, and make the exact same profit,” Rea said.

Mylan's approach could backfire, said George Sillup, chairman of pharmaceutical and health care marketing at Saint Joseph's University in Philadelphia. Someone without proper training 'could inflict some harm or injury,” he said.

Training requirements vary by state. The American Red Cross offers a 30-minute online course for $20.

Pharmacist Brad Arthur, who owns two drugstores in Buffalo, N.Y., and is a past president of the National Community Pharmacists Association, said he would applaud the program despite its threat to his livelihood.

'It's this kind of disruption in the pharmaceutical pricing model that we're ripe for,” Arthur said.