Hmm, those share price targets..
Quote:Are Mylan’s financial incentive plans to blame for its recent EpiPen price hike? That’s what Ronny Gal, an analyst at Sanford C. Bernstein & Co., suggested in an interview with the Wall Street Journal on Thursday.Mylan Executives May Have Raised EpiPen Prices to Hit Company Targets
In 2014, Mylan announced it would reward some 100 employees and executives for not only hitting, but exceeding aggressive profit targets. The company’s top five executives could earn as much as $82 million, according to the WSJ. But in order to reap that reward, Mylan’s stock price had to hit $73.33 by the end of 2018 on adjusted earnings per share (EPS) of at least $6—more than double the firm’s EPS in 2013. If Mylan fell short, employees could still earn 50% of those rewards if the company announced both a $5.40 EPS and at least a $53.33 stock price by the end of 2018.
Considering 90% of Mylan’s revenue came from mature medicines at the time, those targets would have been hard to hit. (The EpiPen represents roughly 10% of Mylan’s revenue, and 20% of its operating profits.) “Mylan realized that their EPS targets will be tougher to reach and decided to raise prices on EpiPen to make that target more achievable,” Gal told the Journal.