Thursday, September 22, 2016

Many Politicians Do Not Understand The Workings Of Business

The CEO Blogger recently watched a hearing by a Congressional Committee of the House of Representatives where in which both Republican and Democrat Congressmen lambasted Heather Bresch, the CEO of Mylan, maker of the EpiPen injection device to deal with allergic reactions, for raising prices 548% in 9 years.  Prices were raised to $608 for a set of EpiPens.   This Blogger is not defending this price increase, nor opposing it because only Mylan understands its cost basis.

However, Mylan's CEO's tried to explain essentially the difference between a wholesale price and a retail price, which these Congressmen just could not seem to understand.   She stated that Mylan earned about $249 on the sale of a set of EpiPen's and that their gross profit was about $50.  The other monies of the $608 were essentially paid to hospitals and or other distributors in the process.   Bresch also went on to say that the consumer usually ended up paying around $50 - $100 for a set of EpiPens because of insurance coverage. 
 
Further, because people are scared to death to say anything under oath before Congress for fear of prosecution, Bresch should have defended this pricing, if it is valid, by saying that only 4 million EpiPens are sold each year because unlike insulin, which Diabetics take daily probably resulting in the sale of billions of doses around the world each year, the EpiPen is an emergency drug only used if a patient has an allergic reaction.  So, lower volume naturally results in higher prices. Even so, Mylan is coming out with a generic version, which will cut the cost in half. 

The point to all of this is that various Congressmen of both parties, some of whom have been in Congress for decades, were absolutely clueless as to the workings of business because they have never had their names at the bottom of paycheck as a business owner.   They clearly do not understand things like direct costs, indirect costs, profit and loss.  Watching this foolish exercise, just proved to me once again how important term limits are for members of Congress.  Those making our laws should have to live under them. 

As it is now, we have a complete disconnect with business reality.   This is just another reason that Congress has a 76% Disapproval Rating.  Term Limits would result in more elected representatives with real life business experience, which might at least help them better understand the impact of their legislative actions that are often job killers. 

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