I asked Mylan if the bigger price increases after the 2014 stock award were intended to help propel its performance toward the earnings and stock price targets.
No, replied Nina Devlin, a spokeswoman.
In a statement, she elaborated further: "Mylan has a large and diverse business, with more than 2,700 products sold in 165 countries and 600 products sold in the U.S. alone. The targets set forth in the one-time special program were not and are not practically achievable based on pricing of any single product."
Ms. Devlin added that after Mylan's recent acquisition of Meda, a company specializing in women's health, respiratory, allergy, dermatology and pain management, the EpiPen business will represent under 10 percent of the company's revenue, compared with 11 percent last year.
But Brian Foley, an independent compensation consultant in White Plains, said it was impossible to separate the company's business decisions from its pay practices. "The pattern of conduct with the EpiPen business seems egregious," Mr. Foley said in an interview. "It looks like price gouging, and why would you do that? The answer has got to be because it's in management's financial interest to do it."
Consider the special stock award. In 2014, Mylan's proxy filings valued Ms. Bresch's grant at $ 13.2 million. If Mylan clears the price and adjusted earnings hurdle, her payout will be far larger.
Now, though, with Mylan's pricing practices under scrutiny, it may be more difficult for the company's executives to clear the hurdles necessary to cash in. Its stock is well below the $ 53.33 price that will be needed to generate a payout. And the company's decision last week to start selling a generic EpiPen at half the $ 600 branded price means the adjusted earnings per share target of $ 5.40 on Dec. 31, 2018, may be more difficult to achieve.
But don't cry for Ms. Bresch. It turns out the earnings hurdle put in place by the board has some wiggle room. That's because it is based not on generally accepted accounting principles but on a so-called adjusted earnings figure that excludes certain corporate costs chosen by Mylan. The company also uses fantasy figures when calculating its top executives' incentive pay packages.
Among the costs Mylan excludes from its adjusted earnings are those related to acquisitions, financing and investment losses. Last year, these and other exclusions gave a big boost to Mylan's pretend per-share earnings. Under generally accepted accounting principles, each Mylan share earned $ 1.70 in 2015. Under its own rules, each share earned $ 4.30.
That spread between Mylan's actual earnings and its pretend number — $ 2.60 a share — has widened significantly. In 2014, it was $ 1.22 a share.
Note, too, that Mylan's true earnings in 2015 were 27 percent below what it actually earned in 2014. Luckily for Mylan's top executives, earnings as computed under accounting rules are not one of the company's metrics for calculating executive pay.
Ms. Devlin, the Mylan spokeswoman, contends that its preferred financial measures are "useful supplemental information for our investors" in addition to those presented under accounting rules. She added: "All public companies in our peer group use non-GAAP measures, as do a large number of public companies outside of our peer group. Furthermore, the board and/or compensation committee has discussed these metrics with shareholders and has taken that feedback into consideration."
At Mylan's most recent annual shareholder meeting, 35 percent of the votes were cast against the company's pay practices. By contrast, the median company in the Standard & Poor's 500-stock index received support from 95 percent of votes cast.
On Thursday, Scott M. Stringer, the New York City comptroller and overseer of city pension funds that hold Mylan shares, criticized Mylan's governance practices in a letter to Douglas J. Leech, chairman of the nominating and governance committee of the company's board. Mr. Stringer, who has voted the city funds' shares against Mylan directors in the past, asked that the company install an independent board chairman to provide oversight.
We'll have to wait until December 2018 to see whether Mylan's executives can cash in their special one-time awards. In the meantime, Ms. Bresch and her colleagues received a windfall after the company acquired certain businesses of Abbott Laboratories in 2014 and incorporated overseas. As part of the deal, executives were allowed to exercise all their unvested stock awards. Ms. Bresch realized $ 32 million in 2015 as a result, proxy filings show.
That's not all. The company also paid its executives' income taxes associated with the acceleration of the stock awards. Under that deal, Mylan shareholders paid the extra $ 5.8 million Ms. Bresch owed in taxes.
The outcry over the EpiPen pricing shows Mylan to be the latest example of a company whose board allowed executives to reap bounties from activities that wound up harming other stakeholders. When they do so in the name of the company's shareholders, it is especially offensive. And now that Mylan has reminded everyone just how common price gouging is in the pharmaceutical industry, even its shareholders are paying a price.
"You would think at least somebody on the board would have the brass and the class to say enough is enough," Mr. Foley said. "We were making money at $ 400; why do we need to charge $ 600? This reminds me of my 16-month-old grandson who after he's had a good meal looks at me and says: 'More?'"
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