Lawmakers were skeptical last week when Mylan chief executive Heather Bresch said that the company made only $100 in profit for a two-pack of EpiPens. During a House hearing, Bresch repeatedly referred to a poster board showing how little of the $608 list price trickled back to the company.
The incredulity was warranted: The profits Bresch told Congress about were calculated after factoring in the 37.5 percent U.S. tax rate, according to a filing with the Securities and Exchange Commission first reported by the Wall Street Journal. That tax rate is more than five times the overall tax rate the company actually paid last year and much higher than its actual U.S. tax rate, which tax specialists have pegged at close to zero.
Before taxes, the EpiPen profit is actually $160 for a two-pack. At the hearing, Bresch said the company sold about 4 million two-packs a year.
"It is intellectually dishonest to include tax provisions for U.S. taxes that aren’t due, and that the company does not in fact anticipate ever having to pay," said Edward Kleinbard, a professor of law and business at the University of Southern California's Gould School of Law.
As The Washington Post has reported, Mylan has reduced its effective tax rate through an inversion by relocating its headquarters to the Netherlands. The company's overall tax rate is well below the U.S. tax rate, at 7 percent in 2015, according to a previous SEC filing. But the taxes the company pays in the United States have been pushed down even further.
Mylan's U.S. tax rate "is close to zero, a very, very low rate,” Robert Willens, an independent tax expert said.
Mylan defended the way it reported its profits.
“Tax is typically included in a standard profitability analysis, and the information provided to Congress has made clear that tax was part of the EpiPen Auto-Injector profitability analysis," Mylan spokeswoman Nina Devlin said in a statement. "It also is important to note that use of a statutory tax rate for the jurisdiction being analyzed (in this instance, the U.S.) is standard."
Rep. Elijah E. Cummings (D-Md.) said in a statement that Mylan has until the end of the week to provide Congress additional documentation.
“We didn’t believe Mylan’s numbers last week during their CEO's testimony, and we don’t believe them this week either, which is why we gave them ten days from the date of our hearing to produce their internal files," Cummings said. "They have until this Friday to give Congress the underlying documents we asked for back in August so we can finally determine the company’s actual profits in each year for the last decade.”