New York City Retirement Systems called on Mylan NV to appoint an independent chairman and strengthen its board oversight overall, blaming corporate governance shortcomings for the company's “gross mismanagement of its EpiPen pricing strategy” and ensuing public firestorm over its rising costs.
In a letter sent Thursday to Douglas J. Leech, chairman of the Mylan board's nominating and governance committee, Scott M. Stringer, New York City comptroller who oversees the five pension funds with combined assets of $163 billion, wrote that the company's 6% total return over the past three years underperformed the median 18% return of its pharmaceutical industry peers. Both returns are annualized for the period ended Aug. 30. In past month, also ended Aug. 30, Mylan stock has fallen 10%.
Among other concerns, Mr. Stringer said, “Mylan's executive pay practices have consistently received amongst the lowest levels of investor support in the (Standard & Poor's) 500 index,” 65% this year. The New York City pension funds voted against ratifying the executive pay.
Aside from an independent chairman, Mr. Stringer's letter called on Mylan to remove non-independent directors from its board's audit committee and nominating and governance committee to ensure only independent directors are members.
Mr. Stringer called on Mylan to establish clear oversight responsibility by a committee for the company's pricing strategy and related regulatory and legal risks, such as those associated with the EpiPen issue.
The price of the EpiPen has risen 400% in nine years to $600.
In the past five years, the price has risen from a $25 co-pay a user might pay to the full cost, Mylan said in an Aug. 22 news release.
Heather Bresch, Mylan CEO, said in an Aug. 29 news release, “We understand the deep frustration and concerns associated with the cost of EpiPen to the patient,” and announced the introduction of a generic product that will cost $300, as well as $300 savings coupon for the brand-name prescription.
The New York City pension funds “have had longstanding concerns with Mylan's board and compensation practices, which we have repeatedly sought to address through proxy voting and shareholder engagement … at each of the company's past four annual meetings,” Mr. Stringer wrote.
The New York City pension funds hold a combined 1 million shares of Mylan stock, valued at $45 million, according to the letter.
Nina Devlin, Mylan spokeswoman, said in an e-mail, “Mylan's board is comprised of highly qualified, experienced and diverse individuals, including 10 independent directors. The board has been actively engaged in overseeing the execution of Mylan's growth strategy over the past decade — a strategy which has brought hundreds of products to the market, saving patients and the U.S. health-care system hundreds of millions of dollars; grown our business globally; and expanded access to high-quality medicines to patients around the world, all while delivering significant value for Mylan's shareholders and other stakeholders.”
Bloomberg contributed to this story.