This past week, the market price of Mylan (MYL) fell 14% from $50 to $43. The price did not fall because of quarterly earnings being down but rather because of corruption within the company. This caused media outlets to systematically start attacking Mylan for inflating the price of the EpiPen two-pack over the past decade.
EpiPen was created in the 1970s at Survival technologies. The rights to EpiPen were bought and sold by several companies up until 2007 when the rights were purchased by Mylan. By then, it was an old product that wasn’t seen as a necessity. In 2007 when it was acquired by Mylan, EpiPen generated about $200 million in revenue. At the time, it cost about $100 to purchase a two-pack and Mylan’s stock was valued at about $20. Over the next decade, Mylan conducted an extensive marketing campaign to make EpiPen a household name and a necessity for kids with allergies. Mylan went as far as to get Congress to pass a law that made carrying EpiPens legal in schools. Fast forward to 2016, EpiPen generated over a billion dollars in revenue for the year 2015. This single product also accounts for 40% of Mylan’s revenue and the current price for an EpiPen two-pack is over $600.
Mylan’s extremely successful marketing over the past 9 years has been so effective that it is the reason why the company is currently under media scrutiny. Millions of people use the product and refuse to use alternatives. Many people don’t even know there are alternatives, some being as cheap as $20. Additionally, some may think that the hormone epinephrine is why the product is so expensive, but each EpiPen uses about a dollar’s worth of the hormone.
With all that being said, the drop in price was led by shareholder fear. Furthermore, many of Mylan’s competitors are awaiting FDA approval, offer an inferior product or are still designing a product that is better than the industry leading EpiPen so Mylan will still be a powerhouse pharmaceutical company for the next few years at least. So long as the company coheres with the demands of the government and works towards having better morality, this shouldn’t have a lasting impact on the image of the company.