(BEGIN VIDEO CLIP)
HEATHER BRESCH, MYLAN CEO: There`s no question, the system is broken.
(END VIDEO CLIP)
SUE HERERA, NIGHTLY BUSINESS REPORT ANCHOR: The CEO of Mylan (NASDAQ:MYL)
responds to a wave of criticism over EpiPen price hikes, points fingers and
pledges to make the treatment more affordable for some.
TYLER MATHISEN, NIGHTLY BUSINESS REPORT ANCHOR: A mountain of controversy.
The market may be calm, but investors are looking desperately for direction
from Fed officials gathering in beautiful Jackson Hole.
HERERA: Secret message. Researchers may have found new sounds — not
software — that could one day hack your phone.
Those stories and more tonight on NIGHTLY BUSINESS REPORT for Thursday,
MATHISEN: Good evening, everyone, and welcome.
The CEO at the center of a firestorm responds to the heat. Heather Bresch,
the $18 million a year head of Mylan (NASDAQ:MYL), the company that makes
EpiPens tried to shift the blame for drastic price hikes on the life-saving
medication to insurers and drug benefit managers today.
In an interview with CNBC, she also vowed to help reduce the cost of the
emergency allergy drug for some people. As we`ve been reporting, the
drug`s retail price has risen more than 500 percent over the past decade,
and that has causes a fierce reaction from customers on Main Street,
lawmakers in Washington and investors on Wall Street.
Today, Brian Sullivan asked Mylan`s CEO the questions many want answered.
BRIAN SULLIVAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: Facing backlash
from the public, the government, and the stock market, Mylan (NASDAQ:MYL)
CEO Heather Bresch defended the recent price increase over EpiPen and
announced the way to lower the price for many Americans. Bresch spoke
exclusively to CNBC on Thursday and tried to answer the question of why
they can`t just roll prices back down after the hike, but what they are
doing to reduce costs in other ways.
BRESCH: Had we reduced the list price, I couldn`t ensure that everyone who
needs an EpiPen gets one. So, we went around the system. That`s what we
announced today. This savings card is equivalent to catch, $300. So,
effectively, we`re cutting the price in half.
SULLIVAN: Many will argue, though, this is not enough, as the price hike
may still leave many paying more out of pocket, especially those with no
insurance or those are high co-pays or deductibles. The price of the
EpiPen needed to treat people having violent allergic reactions has risen
from about $100 seven years to more than $500 or $600 today.
Bresch says that while her company has faced the brunt of the blame, the
entire drug distribution system is at fault and needs to be changed.
BRESCH: Congress and the leaders of this country need to quit putting
their toe in this topic and really fix the system — we have an outdated
and inefficient system. The patient shouldn`t — you know what`s
happening, the patient is paying twice. They are paying full retail price
at the counter, and they are paying higher premiums on their insurance. It
was never intended that a consumer, that the patient would be paying list
price, never. The system wasn`t built for that.
SULLIVAN: Bresch`s argument is that there are simply too many different
players between the drug-maker and the consumer with each taking a big cut.
She told CNBC she wants to change that and is working on a way to sell more
directly to the consumer. But before Mylan (NASDAQ:MYL) can do anything,
it still faces political heat, in a bipartisan group of senators, along
with Hillary Clinton have expressed outrage with some calling for an
investigation into this and other drug price increases.
Over the past ten years, the average price of nearly every prescription
drug in America has risen by an average of 40 percent, far more than the
rate of inflation.
For NIGHTLY BUSINESS REPORT, I`m Brian Sullivan.
HERERA: One of Mylan`s biggest critics is Senator Chuck Grassley. He says
that the EpiPen savings card is not enough. The chairman of the Senate
Judiciary Committee continues to press the drug company for answers about
the price hikes. He also said he may look into the so-called “middle man”
in the health care system, specifically pharmacy benefit managers. They
negotiate drug prices on behalf of players like insurers.
(BEGIN VIDEO CLIP)
CHUCK GRASSLEY, SENATE JUDICIARY COMMITTEE CHAIRMAN: We need to look at
more PBMs. I`m not going to say I`m having any hearing at all. I`m going
to wait until I get the answer from Mylan (NASDAQ:MYL). At that point, if
that answer isn`t legitimate and these prices don`t go down, then we`ll
talk about having a hearing.
(END VIDEO CLIP)
HERERA: That focus on the middle man is pressuring shares of pharmacy
benefit managers like Express (NYSE:EXPR) Scripts and CVS (NYSE:CVS)
MATHISEN: So, is it the middle men that incentivized higher drug
prescription prices as the Mylan (NASDAQ:MYL) CEO says. And what role do
they play in the health care system?
Meg Tirrell is here with that part of the story.
Meg, let`s start by explaining what these middle men are, how did they come
to be, and why do they occupy such an important spot in the chain of
MEG TIRRELL, NIGHTLY BUSINESS REPORT CORRESPONDENT: Yes, a lot of what`s
come out today is just the murkiness, kind of the supply chain in the drug
industry and pharmacy benefits managers play a role in that.
So, essentially, what their role is to negotiate drug prices on behalf of
insurers and employers, so they get a lot of covered patients. So, Express
(NYSE:EXPR) Scripts being the biggest one has 80 million covered lives on
its biggest plan, and then they use that leverage to go to drug companies
and say, OK, give us a bigger discount on this drug and we`ll give you a
better placement on what`s called the formulary. So, maybe a co-pay for
patients and when there`s multiple drugs in the marketplace, they can try
to pit those against each other to get bigger discounts.
HERERA: She mentioned the fact that she feels the middle men are a big
part of the problem. You talked to Express (NYSE:EXPR) Scripts. What did
they have to say?
TIRRELL: We did. We talked with our chief medical officer, Dr. Steve
Miller. He has great issues with the idea that they would actually be
contributing to drug price increases. And, in fact, he issued a challenge
to Mylan (NASDAQ:MYL). Listen to this.
(BEGIN VIDEO CLIP)
STEVE MILLER, EXPRESS SCRIPTS, CHIEF MEDICAL OFFICER: We would love to see
lower drug prices. We pass the savings that we take from the marketplace
back to our plans and so I challenge her. She can lower the price today,
and we`ll make sure that our patients get lower co-pays and our plans play
(END VIDEO CLIP)
TIRRELL: Furthermore, the pharmacy benefits manager trade group coming out
today, calling the co-pay assistants that Mylan (NASDAQ:MYL) has promised
to provide on EpiPens a bait-and-switch strategy that actually doesn`t end
up lowering the price of drugs after all, and says there`s a reason why
it`s illegal to provide that kind of patience assistance to patients
covered by government insurance.
MATHISEN: Does the Mylan (NASDAQ:MYL) CEO have a point when she says we
charge this price, but then the pharmacy benefit manager will pay this
much. They want a markup and a margin, right? The pharmacy wants a markup
and a margin and so when you get to the end user, the customer, they are
going to pay “X” plus.
TIRRELL: Certainly, she has a point that a lot of the middle men take
money from the system.
MATHISEN: They want to make a profit too.
TIRRELL: That`s right. And this is a point that the drug industry has
been trying to push for a long time, and that hasn`t really gained any
traction. I think because it`s so murky. It`s hard to understand what
happens to our drugs when we go to the pharmacy and when we pay for the
So, she does have a point in that there is a lot going on in the middle
there, and a lot of people in the drug industry agree with her that that
contributes to rising prices.
HERERA: So, why isn`t there more competition or generic alternatives for
drugs like EpiPens?
Joining us to talk about that is Peter Pitts, former FDA associate
commissioner and currently president of the Center for Medicine in the
Peter, welcome. Thank you very much for joining us.
PETER PITTS, CENTER FOR MEDICINE IN PUBLIC INTEREST: My pleasure.
HERERA: You know, the EpiPen situation certainly has grabbed all the
headlines, and rightly so, given the fact that there really is no
alternative right now anyway to the EpiPen. But is the process for
bringing a generic or a bio-identical as they are sometimes called to
market, the same as bringing an original drug, an innovative drug?
PITTS: It`s very different. When you bring an innovator drug to market
for cancer or orphan disease like multiple sclerosis, it takes many years
and hundreds of millions if not billions of dollars. When you bring a
generic drug to market, it`s a much more truncated process by statute.
Hatch-Waxman is a law that allows the FDA to bring the generic drugs to
markets without human trials, through bio equivalence trials, and the FDA
can really be the hero here. It can help to bring competition into the
marketplace by prioritizing the generic drug reviews in front of it for
those drugs that don`t already have a generic drug in competition. Imagine
if there were one or more competitors to Mylan`s EpiPen. We`d be in a much
different situation today.
So, the FDA can by rerating the resources and prioritizing the file it has
in front of it, it can be a hero relative to this type of process by
bringing more generic drugs to market, greater access and higher quality,
everybody is happy.
MATHISEN: Competition is certainly part of the solution here.
There are critics, Peter, who would say, number one, that the FDA moves too
slowly in giving signoffs on generic competition. I`d like to have you
address that. And, second, that the owners of the branded or innovator
drugs, this EpiPen was hardly an innovator drug by the time Mylan
(NASDAQ:MYL) had it, by the way. They acquired it from the German
subsidiary, German Merck (NYSE:MRK).
But there are those who would say the owners of the branded drugs do not
make it easy for the generics to get in. Comment on that as well. In
fact, they don`t want them in.
PITTS: Tyler, well, there are two issues and let me address them both.
First, let`s talk about the FDA and its role in expediting these types of
products to the market. During the whole Turing Pharmaceuticals Martin
Shkreli fiasco, it came to light that in fact it was not a generic drug but
a drug with no generic competition, and because of a lot of pressure from a
lot of good people, the FDA has said it`s going to rearrange its resources
to make sure that drugs that don`t have a generic competition, that those
files will be prioritized, and that the review times will be moved down
from two to three years to six months.
So, they said that in March before the Mylan (NASDAQ:MYL) thing came to our
attention. Whether or not that has really hit the bureaucratic process
yet, you know, I`m not sure. It takes time, but FDA does — does have the
promise of more staff. They have got to get them up to speed, but they
understand their role here in making things happen faster without
jeopardizing any safety or quality.
MATHISEN: So, maybe there is some hope there. I want to get your quick
thought on the other thing that the owners of the branded drugs oppose the
generics and then Meg Tirrell has graciously stayed and wants to ask you a
PITTS: Sure. Relative to competition from the innovator industry, I don`t
think that innovator drug companies, many of whom by the way are also in
the generic drug business believe that generic drugs are bad. They
understand they play an extremely potent role in our health care system.
Over 85 percent by volume of all the drugs in this country are generic
So, you know, there`s no getting away from that. I don`t believe anybody
wants to squash competition and that`s what drives the free market system.
TIRRELL: Right, to Tyler`s point though, I mean, you do see the citizen
petitions filed by Mylan (NASDAQ:MYL), trying to fight Teva`s EpiPen or
Teva trying to fight Mylan`s challenges to its multiple sclerosis drug
Copaxone, so that clearly does happen trying to keep the competition off
But going back to the FDA, why does it take a situation like this,
gathering so much media attention, toll try to inspire them to act? You
know, I get notifications of dozens of drugs that are in shortage,
important chemotherapy drugs. The FDA knows it has a lot of shortages
going on. Why can`t it act faster to approve more competition of those?
PITTS: And, in fact, drug shortages is one of the reasons that the FDA is
moving now to bring these first-to-market generics to market quicker. I
mean, you don`t want cancer and HIV drugs to be in short supply. There`s
only one manufacturer.
That was kind of one of the electrical shocks that got the FDA off of its
behind to get things done.
I think when it comes to things like citizens petitions and other I.P.-
related lawsuits, these are there for a purpose. A lot of time, citizens
petitions to bring scientific evidence in front of the FDA. The difference
is when an effort is brought forth to stall rather than to address
important scientific issues. That`s a relevant conversation to have.
HERERA: And we will have you back to have that conversation, Peter.
PITTS: Looking forward to it.
HERERA: Thank you very much.
Peter Pitts, former FDA associate commissioner, and Meg Tirrell, thank you
MATHISEN: On Wall Street, health care stocks fell for a second straight
day, dragging down the broader market, which traded in a fairly narrow
range one day ahead of Fed Chair Janet Yellen`s big Fed speech, more on
that in a moment.
The Dow Industrials off 33 at 18,448. NASDAQ down 5, the S&P was off
nearly three. A red-letter day.
HERERA: The economy is the focus of that annual meeting of central bankers
taking place in the mountains of Wyoming. Ahead of Fed Chair Janet
Yellen`s speech tomorrow, the Federal Reserve is coming under increased
scrutiny for its recent policy decisions.
Steve Liesman reports from Jackson Hole.
STEVE LIESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: For the past several
years, the Fed has gathered for its annual meeting in Jackson Hole, the
Grand Tetons have served as a majestic backdrop for crisis, the great
financial crisis, the fiscal cliff and the fears of the break-up of the
European Union, to name a few. But as markets away Janet Yellen`s speech
Friday, the debate is less about fighting crisis and more about removing
accommodation. Fed speak for raising interest rates.
ROBERT KAPLAN, DALLAS FED PRESIDENT & CEO: Labor slack is coming out of
the labor market. We`re making from us straightly slow progress but some
progress on inflation, and I think that GDP growth in the second half of
the year will be stronger because the consumer is strong, and even the
second-quarter GDP number which was disappointing, was disappointing
because of an inventory adjustment and final demand was in fact strong.
So, yes, I think the case is strengthening. I`m not going to speculate on
LIESMAN: There`s still plenty of reason for worry. U.S. and global growth
has been sluggish and inflation remains below the Fed`s 2 percent target
and the fallout from Brexit though initially lesser than predicted remains
a cause for global concern as do prospects for weaker Chinese growth. Some
Fed officials say the U.S. economy is strong enough to withstand higher
ESTHER GEORGE, KANSAS CITY FED PRESIDENT: I do think it is time to move
that rate. That doesn`t mean I favor high rates. It doesn`t mean I think
that needs to happen rapidly. I agree that a gradual move in these rates,
but under conditions where we`re seeing employment move in the direction it
is, where we`re seeing low and stable inflation, I think it`s fair to say
we could remove some of that accommodation.
LIESMAN: To George, the greater risk is a Fed that remains too low for too
long and foments bubbles and asset markets that could pop. The meeting
will center on the Fed`s framework for deciding on interest rates, a point
frustration and bitter criticism among some.
Former Fed Governor Kevin Warsh in an op-ed called “Fed Policy erratic”,
questioned the bank`s credibility and said the Fed is poorly positions to
battle the next recession which is closer than the Fed believes.
So, despite the serene setting and relative calm in markets, the Tetons
will frame a Jackson Hole symposium rife with controversy. So, perhaps
this year, not crisis.
For NIGHTLY BUSINESS REPORT, I`M Steve Liesman in Jackson Hole.
HERERA: Still ahead, Donald Trump is not spending nearly as much as
Hillary Clinton on TV ads, and the broadcast industry is taking notice.
HERERA: Ride hailing service Uber reportedly lost more than $1 billion in
the first half of the year. As first reported by Bloomberg, Uber`s losses
mounted in the second quarter, including the U.S. where it had turned a
profit during the first three months of 2016.
MATHISEN: Sears (NASDAQ:SHLD) borrows $300 million from its chief
executive Edward Lampert and that`s where we begin tonight`s “Market
The retailer is accepting the funds from the CEO`s hedge fund and follows
another quality earl loss and declining sales. The company cited weak
demand for home appliances and lower sales in its Kmart-brand stores.
Sears (NASDAQ:SHLD) has posted annual losses in each of its past six fiscal
years. Shares today down 4 percent at $14.07.
And Dollar General (NYSE:DG) reported its weakest sales in a decade. Lower
food prices, growing competition and a drop in food stamp coverage hurt the
discount retailer`s results. Shares of Dollar General (NYSE:DG) plunged 17
percent to $75.48.
And it wasn`t much better for rival Dollar Tree (NASDAQ:DLTR). The biggest
U.S. discount chain reported lower than expected quarterly sales and cited
a challenging retail environment. It also trimmed its sales outlook.
Shares fell nearly 10 percent to $85.50.
HERERA: Signet Jewelers reported an unexpected drop in same-store sales
and an overall revenue decline. The owner of Jared`s and Zale`s also saw
profit fall, siting impacts from lower commodity prize and consumer
uncertainty surrounding the upcoming presidential election. The company
trimmed its profit forecast for the year. Shares fell more than 12 percent
Lower marketing costs and higher spending by customers in Britain helped
Tiffany (NYSE:TIF) post better than expected earnings. Revenue with the
luxury jeweler didn`t fare as well though. Sales for the seventh
consecutive quarter coming in below estimates. Shares finished the day
though up 6 percent to $73.28.
And Medtronic (NYSE:MDT) posted higher than expected profits thanks in part
to lower costs and tax payments. Revenue with the device-maker did fall,
though, as weaker demand for the company`s heart devices hurt results. The
company also reiterated its sales guidance for the year. Medtronic
(NYSE:MDT) shares were down nearly 1.5 percent to $85.39.
MATHISEN: Republican presidential nominee Donald Trump has appeared on
broadcast and cable television programs often, to put it lightly, during
this campaign season. That means he doesn`t have to spend as much, he
thinks, on advertisements, and the media business is taking notice.
Julia Boorstin has the story.
AD NARRATOR: Change that makes America safe again.
JULIA BOORSTIN, NIGHTLY BUSINESS REPORT CORRESPONDENT: A potentially
troubling stat for broadcasters. Donald Trump has spent just over $4
million on TV ads in the general election race to date, with his supporting
PACs spending another $14 million.
STEVE PASSWAITER, KANTAR MEDIA: We would consider it unprecedented given
that there`s been a significant amount of time now since the convention
that there`s been no activity by Mr. Trump until the last week where he put
up a four-state buy for about $5 million. That is, to our knowledge, the
only television time that he`s booked.
BOORSTIN: That`s a steep decline from 2012 when Mitt Romney and supporting
PACs spent $38 million by June. And President Obama and Romney`s campaigns
each spent more than $400 million by Election Day.
HILLARY CLINTON (D), PRESIDENTIAL NOMINEE: They can be proud of us.
BOORSTIN: So far, Democratic nominee Hillary Clinton is far outpacing
Trump but has a ways to go to catch up with the last presidential cycle.
Her campaign and support will groups have spent $114 million.
And now, media companies will look for those ad dollars to come from other
political races. “Tribune” CEO Peter Liguori says only a third of the
company`s political advertising this year will come from the presidential
race. The rest coming from tight races for House, Senate and governors`
PASSWAITER: There is a lot of Senate activity out there in the marketplace
right now. There are certainly a number of seats that are very hotly
contested, and the spending there has been very healthy. Does that help to
make up for the lack of spending in the presidential race? Maybe. I think
that`s yet to be determined.
BOORSTIN: And CBS (NYSE:CBS) has said ads around down ticket races will be
particularly robust. It and other media giants, NBC Universal (NYSE:UVV),
Time Warner (NYSE:TWX) and Disney (NYSE:DIS) have all said they are cashing
in on political ads in their recent earnings reports.
Its smaller local players that are suffering, scripts blaming second-
quarters earnings on a political shortfall, saying political ads will come
in below its projections this year.
All of these players though benefitting from what has been a crazy
political season driving ratings to political news coverage. In total,
political ad spending is up this year from 2012 thanks to the contentious
For NIGHTLY BUSINESS REPORT, I`m Julia Boorstin in Los Angeles.
MATHISEN: Coming up, secret voices. Could the simple act of watching a
video on your computer end up hacking your smart phone one day?
MATHISEN: Here`s a look at what to watch tomorrow. As we reported, Fed
Chair Janet Yellen will speak at the annual symposium in Jackson Hole.
We`ll get another read on economic growth, with the released of second-
quarter GDP figures and the consumer sentiment report will tell us if
Americans are feeling more optimistic this month and that`s what to watch
HERERA: Could watching a video hack your smartphone? It may seem far-
fetched, but a team of researchers came up with a secret command that would
actually hijack your device.
Andrea Day sat down with the man behind it, and you may want to listen
closely to what he has to say.
ANDREA DAY, NIGHTLY BUSINESS REPORT CORRESPONDENT: A muffled voice coming
out of your computer`s speakers? You might not be able to make it out, but
that sound could hack your smartphone.
MICAH SHERR, GEORGETOWN UNIVERSITY ASSOCIATE PROFESSOR: Anything that you
can ask your phone to do, these commands can ask your phone to do.
DAY: It`s called hidden voice command. The technique created by a team of
researchers from the University of California-Berkeley and Georgetown
University, headed up by associate professor Micah Sherr.
SHERR: We wanted to look at, is it possible to issue commands that could
be understood by these computers but not by a human being?
DAY: So, he says the team worked for months transforming words.
SHERR: To produce that really sounds a little bit like Darth Vader.
DAY: Just listen to this.
SHERR: The speech recognition system heard the command open Facebook
(NASDAQ:FB), and that`s what it did. Also they can cause your phone to
open a website and a malicious website with some malicious software on
there that runs on your phone, takes over your phone.
DAY: He says the technique works by tapping into voice recognition systems
that are always listening for commands. The team`s demo used Google
(NASDAQ:GOOG) Now, but Sherr says it could also work with systems like
Apple (NASDAQ:AAPL) Siri and Amazon (NASDAQ:AMZN) Echo.
SHERR: So even if you have a lot of security on your phone, a fire wall or
traditional security systems, if you`re not also protecting your voice
interfaces you could be vulnerable.
DAY: The audio could be hidden inside a video that you might watch on
SHERR: Some popular YouTube video which has a strange noise in the
background that a human being would just dismiss as an oddity. But at the
same time, that noise could be controlling cell phone that happens to be
located next to a computer.
DAY: We reached out to Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG) and
Amazon (NASDAQ:AMZN) tells us, “We take privacy and security very
seriously. I wouldn`t speculate on hypothetical situations.”
And Google (NASDAQ:GOOG)? “We offer users the option to train their
Android device to respond only when it recognizes their voice.”
Since Siri wasn`t part of the team`s research demo, Apple (NASDAQ:AAPL)
SHERR: A lot of things have to be going right to succeed, but whenever
there`s a speaker, there`s an opportunity to launch one of the hidden voice
DAY: And researchers say as far as they know, hackers haven`t used the
technique yet. But the team wanted to prove that it could work to help try
and prevent it. His best advice is to keep your voice software off when
it`s not in use, or do voice authentication, where you can teach it to only
respond to your voice.
I`m Andrea Day for NIGHTLY BUSINESS REPORT.
HERERA: It`s creepy.
MATHISEN: It`s creepy. I`m going to go home and train my phone —
HERERA: Go train your phone. I`ll do the same.
That does it for NIGHTLY BUSINESS REPORT for tonight. I`m Sue Herera.
Thanks for joining us.
We want to remind you, this is the time of year your public television
station seeks your support.
MATHISEN: I`m Tyler Mathisen. Thanks for watching and thank you for your
support. Have a great evening, everybody. We`ll see you back here
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