The controversy behind Mylan and the EpiPen has again taken a prominent role in the news cycle after their highly scrutinized CEO testified before Congress last week. The hearing on Capitol Hill focused on the $608 list price for a two pack of EpiPen product and the many ways that the amount is impacted by what their CEO called a “broken” healthcare system to arrive at a profit number of $100 per two pack of the EpiPen.

Then, the news comes out today that the profit figure of $100 was inaccurate and that Mylan actually makes 60% more in profit per two pack of this life saving product, so the “more accurate” figure is $160 in profit. The members of Congress were upset over the amount of profit they were making when they thought it was $100, I cannot imagine what their reaction was at this news today.

The explanation by Mylan regarding the change in the overall profit amount in this case was that they miscalculated the profits based on an incorrect corporate tax rate (while my fingers type the words – I cannot believe their excuse). The LA Times and CNBC did a great job in reporting this situation today, with the former news source interviewing a USC professor who has a very honest view on how badly Mylan looks after this “miscalculation” of profits.

The question naturally is raised: How can Mylan miscalculate their corporate tax rate? The other question: the corporate tax rate in the US is so high, that should have made their profits even lower if that is accurate?

The answer to the first question is murky, it appears that Mylan knew the tax rate all along and tried to present a different set of profit figures to Congress. The second question could be answered with the facts: Mylan based their original calculation on the standard U.S. corporate tax rate of 37.5% , but Mylan does not pay that rate of corporate taxes due to a tax inversion they completed in the past.

I have reported on tax inversions for years for several news sources, in brief, it is an accounting and business practice where a U.S. company can merge or obtain an overseas company and then change their corporate headquarters address to the country where they bought the controlling interest in the other company. That change in corporate headquarters location means that their corporate tax rate would be adjusted to the tax rate of the country they were now headquartered within.

In the case of Mylan, they completed an inversion to change their corporate headquarters to The Netherlands, so their U.S. tax rate should have been adjusted to about five times less than the current U.S. corporate tax, or around 7%. However, the reality is that some experts have reported to both CNBC and the LA Times that their corporate tax rate is close to zero. That fact is really going to get people angry.

Therefore, the adjusted Mylan numbers for profit are based off of a 7% tax rate in the U.S. which they actually do not pay, so those numbers are wholly inaccurate. The situation gets compounded when the fact remains that they sell about four million of the two packs of EpiPen products per year.

I keep coming back to the timing of this announcement. It has to have been divulged at this time because it was leaked and someone in the media had it or someone threatened the company that it would get released. Mylan had to get out “in front” of this story and even then it will be tough for them to withstand. The fact that they revealed this change in profit numbers today and that they misrepresented those figures to Congress is worthy of a full Congressional investigation into their business practices.

The other fact that this scenario uncovers is that Mylan pays next to nothing in corporate taxes and is still trying to “game the system” and price gouge a lifesaving product to the American public. These tax inversions are a huge problem for our country and they must be stopped, they allow a mechanism for big companies to get bigger and wealthier, while the average person gets a tax increase.

The healthcare system does have a great deal of problems currently, but dishonest corporate officials from a major pharmaceutical company surrounding a multi-billion dollar drug product that families need to provide lifesaving measures for a patient in need is totally outrageous. This completely rapacious behavior and unbridled pursuit of greed by some of these corporations must be halted.

The EpiPen is a product that should be provided at a fair price to the Americans who need it, and Mylan should be ashamed that they conducted themselves in this manner. Please contact your local Congressional representative if you feel that Mylan should be investigated by Congress for their mishandling of this situation. The American people have a right to know the true story behind the profits this company made from their greed driven price gouging of this essential product and we cannot trust their accountants in case they “miscalculate” again.
Mylan is going to find out that this is a firestorm that they will need some serious resolve to withstand and a generic form of the product is not going to make this situation better. In fact the amount of profit they have made is so disturbing to so many people, it will take a long time before this situation is repaired.

There is a hacker online right now who has made the news with a method he put on YouTube which demonstrates how you can take ingredients and make your own EpiPen at home for a lot less. It is these sorts of practices that should could have a disastrous impact on the safety of the drug and that will defeat the purpose that both Mylan and the U.S. government are supposed to protect: the health and well-being of the patient. That is a truly frightening prognosis.