Sen. Manchin’s Daughter Likely To Not Lose Pay Over EpiPen Scandal

Robert Donachie | Capitol Hill and Health Care Reporter

Top executives at Mylan, a pharmaceutical company run by the daughter of Sen. Manchin — Heather Bresch — are unlikely to take a pay cut following the EpiPen pricing scandal currently casting a large shadow over the firm.

EpiPen, short for epinephrine injection, is a life-saving auto-injection device for those who suffer from serious allergies that cause anaphylactic shock–a deadly medical occurrence. The user can self administer the drug if a serious allergic reaction occurs.

When Mylan acquired the device in 2007 the cost of the drug to consumers was just $56.64. By 2015, Bresch spiked the price to $317.82. The cost of the epinephrine inside the EpiPen is just one dollar. (RELATED: CEO Spiked The Price Of The EpiPen 461%)

Mylan agreed to a $465 million dollar Medicaid settlement with the Department of Justice (DOJ) and other government agencies in attempts to stifle public outcry surrounding the 461 percent EpiPen price increase Oct. 7.  The firm insisted in their announcement of the agreement that investigators failed to present “any finding of wrongdoing on the part of Mylan Inc. or any of its affiliated entities or personnel.”

What really has Mylan investors and others in the pharmaceutical industry heated is the fact that company executives seem to be insulated from the scandal, with no changes being made to their compensation.

Heather Bresch’s salary rose from $2,453,456 in 2007 to $18,931,068 in 2015. She is one of the highest-paid chief executives in the entire industry.

The company calculates executive salaries using diluted earnings per share, a form of adjusted net income. Diluted earnings is an important metric when looking at the financial health of a company, as it takes into account what would happen if diluted securities were utilized. Diluted securities increase the weighted number of shares outstanding, and in turn effectively decrease earnings per share.

The EpiPen maker is not the only firm to creatively calculate executive compensation, some 400 companies in the S&P 500 reported some form of adjusted net income in 2015, the Journal reports.

The most important factor to consider in regards to diluted earnings in the Mylan case is that it allows the firm to exclude the cost of litigation settlements, like the Medicaid settlement.

If the cost of the settlement was included, it would cut nearly 12 percent off the firm’s adjusted net income. That would in turn mean Bresch’s $18.9 million salary would take a hit, a move that would likely leave many in the industry with good feelings.

Mylan’s top executives received $300 million dollars combined in salary payments over the past five years, the Journal reports.

While there is nothing illegal about reporting adjusted earnings, as long as they are honestly disclosed, it is not stopping many in the industry from voicing their discontent with how Mylan is reporting their earnings.

Mylan’s diluted earnings have, on average, been 85 percent higher than the reported company earnings under the Generally Accepted Accounting Principals (GAAP). Adjusted earnings were five times higher in the first half of 2016 than earnings reported under GAAP.

Mylan refused to comment.

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