Refer to the article in the RMI 2101 Bulk Pack Academic Year 2016-2017, under Topic 3, in the Enterprise Risk Management ERM folder, ?Mylan reputation at stake in EpiPen controversy.?

From an Enterprise Risk Management (ERM) perspective, identify and briefly describe a supply chain risk under each of the following categories. This is fairly obvious in some cases and not so obvious in others. [4 points]

Hazard

Operational

Financial

Strategic

For each risk you identified above, indicate if it is a pure or speculative risk, and justify your answer. [2 points]

For each risk you identified above, indicate if it is a diversifiable or non-diversifiable risk, and justify your answer. [2 points]

Advisen Front Page News Monday, August 29, 2016 1 Mylan reputation at stake in EpiPen controversy Publication Date Source: 08/27/2016 Pittsburgh Tribune Review (PA) Aug. 27Discounts on EpiPens could cost Mylan NV up to $100 million, but calculating the damage to the pharmaceutical company's reputation from its controversial price hikes may be more difficult. Mylan found itself at the center of a storm this week as a burst of outrage over a more than 500 percent increase in the price of EpiPen since 2007 forced the company to offer subsidies to cut outofpocket costs for some patients buying the lifesaving allergy drug. The company's fast response to try to quell the growing uproar was praised by experts, yet the lack of a clear explanation or a reversal of the price increases left Mylan, based in the Netherlands and run from offices in Cecil, Washington County, open to continued criticism. CEO Heather Bresch shifted blame for the hikes the retail price of an EpiPen twopack is $609, up from about $94 in 2007 onto middlemen, such as pharmacies and insurance companies, and what she called the broken health care system. Her comments, made during a Thursday appearance on CNBC, struck Gene Grabowski, a crisis communications expert and partner at Washingtonbased consulting firm Kglobal, as "disingenuous." "Mylan's argument for the price increase is very unconvincing," Grabowski said. "It's not convincing to regulators, not convincing to the media and not convincing to consumers." A better strategy would have been for Bresch to accept blame for the increases but explain that the company was pushed to quickly ramp up production of EpiPen to meet demand after competing products were pulled from the market and delayed by regulators, Grabowski said. French drugmaker Sanofi last year recalled a similar product, and Israeli company Teva Pharmaceutical Industries has been delayed by the Food and Drug Administration in launching a generic version of EpiPen. "I would have said, 'Look, this pen is in high demand. We have to produce it. Don't point the finger only at us the FDA created this monopoly,' " Grabowski said. Mylan spokeswoman Nina Devlin declined to comment. Analysts at Wells Fargo Securities said in a report Thursday that Mylan should have immediately silenced its critics by reversing its most recent price increases. EpiPen's price was raised three times since the end of 2014, when a twopack cost $401. The hikes were noticed this summer as parents refilled prescriptions for children heading back to school. The Wells Fargo note to its clients said Mylan's response "will not satisfy the calls for inquiry and calls for lower prices. We believe Mylan would have been better served by taking a simple approach of clearly acknowledging with contrition its decision to raise prices (and) simply lowering the price to the level of two or three years ago." Instead, the company took steps to help patients hit with high outofpocket costs for EpiPen. Mylan is offering a discount card that will reduce the outofpocket payment for patients by up to $300 for an EpiPen twopack. In addition to the discount card, Mylan said it will allow families with higher incomes to qualify for another program that provides subsidies that could eliminate out ofpocket costs for uninsured and underinsured patients. Umer Raffat, an analyst at Evercore ISI in New York, estimated that the two subsidy programs could end up costing Mylan about $100 million, or about 10 percent of EpiPen's annual sales. Despite the negative publicity, Grabowski said it's unlikely that Mylan will suffer longterm harm to its business or reputation. "Every drug company has suffered from that," he said. "But they continue to thrive because they make products in high demand and they make a lot of money, so stockholders stay with them." Mylan stock price rebounded slightly Friday, rising 18 cents to $43.03. It had fallen about 10 percent over the previous four days. Mylan has weathered other controversies. The company moved its corporate address to the Netherlands in 2015 in a taxlowering maneuver known as an inversion and was criticized by American government officials for not paying its fair share of taxes. Mylan also is facing scrutiny over land deals involving a board member. The company purchased property previously owned by a director, Rodney Piatt, for its Cecil headquarters but didn't disclose the deals to investors. The Securities and Exchange Commission has asked the company to provide documents related to the purchases. CEO Bresch has faced questions about whether she was given special treatment while working on her master's degree at West Virginia University. She has denied any wrongdoing. Audrey Guskey, an associate professor of marketing at Duquesne University, said she believes Bresch's explanations about the price hikes and the company's moves to help patients with outofpocket costs were sufficient to tamp down the controversy. "I think this response is very fair and very thorough," she said. Mylan is doing nothing different from any other company in the pharmaceutical industry by raising its prices, Guskey said. "For whatever reason, they've been taken as the bad guys in this situation." Instead of focusing on one company, she said, "we need to be outraged about our health care costs in general." Alex Nixon is a TribuneReview staff writer. Reach him at 4123207928 or anixon@tribweb.com. ___ (c)2016 The Pittsburgh TribuneReview (Greensburg, Pa.) 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