hands. i think that yellen is going to be slightly more hawkish tomorrow, so if you want to do anything, maybe take a run at the banks. they've been acting well. >> joe. >> buy some volatility. >> that does it for us on "the halftime report." don't go anywhere. "power lunch" begins right now. >> melissa, thank you very much. good afternoon. and welcome, everyone, to a special edition of "power lunch." mylan under fire. i'm tyler matheson. it is the story that everyone is talking about, and no wonder. whether you've never heard of an epipen or never owned a share of mylan stock and never will, you've got a stake in this story, and that is because it goes directly to how life-saving drugs get to market in america and whether the fda and congress are doing enough to make sure they do. and fast. it speaks to the byzantine ways drug prices are set in this country. a process that involves manufacturers, insurers, and an almost unbelievably complex

marketplace. it touches on complex and policy from the role of obamacare to the candidates on the. ca campaign trail. at the heart of it, a medicine who has gone to more than $600 a dose in less than ten years, and a ceo whose compensation has risen reportedly 671% in that time to $18 million. that ceo, heather braesh, was exclusively on cnbc today. how did she do? do her critiques of middle men and politicians stand up? all that and more today on a special edition of "power lunch." and welcome to that special edition. i'm michelle caruso-cabrera. let's show you what's going on with stocks, which are steady at this hour. today could mark the 34th day in a row the s&p 500 has failed to move 1% or more in either direction. materials and utilities are leaving the s&p sectors.

>> i am brian sullivan. the story captivating america. mylan under fire over the epipen price hike. the stock also hit hard since last week. the harsh spotlight a shine to the company. now, earlier today, we had an exclusive broadcast interview with mylan ceo heather bresh. if you missed it, we will get to it in just a bit. but first, to the flood of new development since that interview this morning. the pharmacy benefit management companies like express scripps and cvs getting hit hard at this hour. mylan's ceo taking aim at them for a big chunk of the pricing, saying their massive position in the market is also pushing prices higher. express scripps firing back, saying "our patients' co-pays on epipens have remained stable over the last 18 months, with an average price around $73.50." we'll get more on that coming up. also, washington weighing in on the issue. democratic senator joe manchin of west virginia, who also happens to be heather bresh's father, releasing a statement saying, today i heard mylan's

initial response. i'm sure mylan will have a more comprehensive and formal response to those questions. i look forward to reviewing the response in detail. he also goes on to say that more needs to be done about lowering prescription drug prices. and a spokesperson for the democratic presidential candidate hillary clinton saying, mylan's epipen discounts, which they announced this morning, are "insufficient." all right. so, now let's get to that interview that is front and center today. mylan's ceo speaking out for the first time since the epipen controversy became front page news. >> help our audience, many of whom are parents themselves, understand how the price of a drug goes from $60, $75, $100 five or ten years ago, to $600 today. how does that happen? >> the $600 is a list price. that $608 is a list price. what mylan takes from that, our net sales is $274. and against that, manufacturing

the product, distributing the product, enhancing the product. investing. when we took over this product eight years ago, there was very little awareness. we took on -- we have doubled the lives of patients that are carrying an epipen. >> the american medical association has said this is basically the same product it was in 2009, and yet the price has gone up 300 or 400 fold. >> so, look, no one is more frustrated than me. >> but you're the one raising the price. how can you be frustrated? >> my frustration is there's a list price of $608. there is a system -- i laid out that there are four or five hands that the product touches and companies that it goes through before it ever gets to that patient at the counter. our health care is in a crisis. it's no different than the mortgage financial crisis back in 2007. this bubble is going to burst. >> what bubble? what are you referring to? >> so when you walk up to a counter, i think that it's fair to say any time you're shopping for anything, you know what that product is going to cost when

you walk up to the counter. only in health care, and in this instance pharmaceuticals do you walk up to that pharmacy counter, you could have paid $25 yesterday and you're paying $600, $1,000, $2,000. deductibles went overnight -- what's coming out of a patient's pocket went from $100 to $3,000. >> mom and pop, when they go to a walgreens or a cvs and they have to pop down $500 for an epipen and they see mylan on it, do they care about all those other people making the cut? they don't. >> no, and they shouldn't care. that's why congress and the leaders of this country need to quit putting their toe in this topic and really fix -- we have an outdated, inefficient system. >> what you announced today was you tripled the rebate. there's a rebate. that's what you're talking about with list price versus what people will actually get back. why not just roll back the price increase? why do the around the way rebate? >> brian, here's the perverse thing. 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 cash. $300. so effectively, we're cutting the price in half, but we're letting you take control of that. we're letting the patient take control of that. you guys have covered price increases one story after the next. the next story is going to come and go. this election cycle is going to come and go. and i hope -- i can assure you of this, i'm committed to change. congress, the leaders, the senators, i've called all of them. i want to have a face-to-face meeting. price is one part of the problem. >> you do? because a bunch of bipartisan senators would like to speak with you as well. >> well, that's good, because they haven't called me back to set a date. >> have you reached out to senators? >> i reached out to senator grassley, klobuchar, senator warner. >> you reached out to them? >> two days ago. i called them, and said i welcome -- >> and when is the meeting? >> they haven't set it.

i said as soon as you can meet, i'm there. >> congress -- you know they're going to call you in. let's say there's a hearing. who needs to be at that table? >> who needs to be at that table? all the other players. pharmacy, pbms, pharmaceutical benefit managers, doctors, pharmacy. they need to be at the table because this system needs fixed. >> we are the worldwide leader in business news because we go across the globe. and so you hear from people around the world. you know what they say? i'm in canada, and the epipen is $100. or i'm in germany and the epipen is $110. why is it so much cheaper everywhere else? >> we do subsidize the rest of the world innovation. we do subsidize, and as a country, we've made a conscious decision to do so. and i think the world's a better place for it e. but that doesn't excuse an outdated, inefficient system and we can't hide behind it. congress can't hide behind it anymore by just saying pharmaceutical companies are horrible corporate citizens and

they're greedy, and then that be the end of it. they need to not just put their toe in it. you need to get in substantively and meaningfully and you need to change. >> if i'm a mylan shareholder and the stock is down pretty big the last couple weeks, i would say, heather, you're the daughter of a prominent politician and you're raising prices right in front of one of the most contested elections in american history. where the biotech and pharma industry are being labeled as greedy, corporate overlords by many high-ranking members of not only congress, but people running for election. why now? >> look, brian, it's not now. we've invested over eight years. this wasn't overnight. i just mentioned all the things we've done and we're continuing to do. i'm running a business. i told you, we have over 600 products here in the united states that we guide mid to single digit erosion decreases. i know no one wants to talk about price decreases, but that does happen in the industry to

keep medicine affordable. >> it doesn't seem like it. >> i know. because on the brand side of the house, it's -- the system incentivizes higher prices. that list price, because of all the players -- >> are the pharmacy benefit managers taking a bigger cut? >> look, there is no transparency. i put that metal bar, the buckets, because you can't determine who is getting what piece of the pie. >> because i've read, and you hear, that your cost of the epipen is probably $3. >> if you look at the auto inject injector, we have made changes. needle protected, so you don't see that needle. the ease of use. when you're in an anaphalactic event, you need that in seconds. and it needs to work every time. >> is mylan a greedy company? you've been labeled greedy. >> listen, we have for over 50 years fought for affordable

access to medicine. we have fought to raise the quality standards. we have fought to make it a level playing field that for the products that everybody is taking here in the united states, meets the same quality standard. we have fought night and day to bring products to this country, or into the marngt place at affordable prices. >> given the fire storm around this, are the price hikes for mylan done? >> look, we are going to continue to run a business and we are going to helicopter to meet the supply and demand of what's out there. i don't think anyone should stay status quo, or business as usual. this is a dynamic, dynamic industry. >> let's get started with meg tirrell who joins us as well. initial thoughts? >> it was really interesting to hear a drug company ceo actually coming out and saying what everybody's been whispering about, which is putting the blame on the middle man, saying there's an entire system here that is very murky, that consumers don't see, and they are contributing, and actually

incentivizing prices of prescription drugs to be raised. this is something i hear all the time in the drug industry, and now it does seem like this conversation is going to not just start, but really become centralized to the drug pricing. >> two things, as part of their press release, they put out a graphic trying to explain how much is added by the middlemen. an extra $300. that would also explain why all the pharmacy benefit managers are getting hit today because maybe the target's going to move to them about why they're raising prices as well. >> mylan versus the supply chain, looking at here how the pbms like express scripps and cvs are potentially -- at least the volatility between them is going to only increase. >> and we're showing viewers that graphic right now. so mylan says that their net price is $274 for two of them. once they hand it ohver to the distributors, that's another

$334 to the price which is actually set by mylan. >> that's correct. so the argument that the system incentivizes higher drug prices, some people would push back and say, but still, your profit is increasing. and yes, while a lot of the analysts are citing the last year when sales of the epipen didn't really increase much over the previous years, because they're probably giving more to the payers and the pbms in the middle, their profit has increased significantly on the epipen since they bought it. >> how much do the pharmacy benefits managers pay to mylan to buy the product? is that the number there? >> we don't know. >> it's negotiated differently. >> negotiated differently from different ones. >> we know the net number. >> they're not paying 608. >> no. you can subtract the difference there and the net number that mylan is getting on average across all of those is about that much. >> says mylan. >> exactly. says mylan. here's the other thing. the consumer -- so express

scripps comes out and says the co-pay for our consumers is $74. if you get your prescriptions through that company, you haven't seen a price increase, right? it must depend -- >> no. >> on who your -- >> that's not true. >> express scripps says the co-pay is $74. >> listen to the precision of the language. the co-pay. not the cost. >> the cost to consumer. what you pay out of your wallet. >> you go to the pharmacy wallet and you're going to put down $74. >> what's express scripps's net income? >> on that particular product i don't know. >> i'm not picking on express scripps. but their net income rose $200 million. >> what i'm trying to get to is the bottom of how many consumers are actually seeing this price hike. you'd have to go through every prescription pbm and find out what the co-pay is per person. >> that's right. so it seems like the folks who are not insured or government

insured, maybe the ones who -- the folks who are government insured won't be helped by these co-pay assistance programs and the patient assistance programs from the company. you're not allowed as a company to pay these kinds of discounts and rebates back to people who are covered by the government. so there will still be a certain segment of the population who will be exposed to the higher co-pay costs. >> the point -- let me -- the point that she was trying to make, i think, when i asked her why don't you just cut the price, roll back the increase instead -- i wish i had some money, because i would try to explain this with cash. it would be easier to do. which is basically, let's say that tyler, you are the consumer. and meg, you are mylan. or you're the pharmaceutical company. and this is her explanation. and i'm the pbm and you're the wholesaler and you're the distributor. so we all have a dollar. we double the price. so now you have two, i have two, you have two, and you have $2. heather's argument was if i cut my price in half, if i go back

to the dollar, there's no guarantee that me, you, or you are going to cut your prices to her either, and thus the price to tyler matheson doesn't go down by 50%. it would go down by 10%. >> under this assumption, the cost of the drug is -- i set the cost of the drug at $10. and that's split equally across the table. that's what you're saying here. so if i cut the price to $5 -- >> but i don't cut my price to her. that's what heather was arguing. >> the discount wouldn't be passed along because these middle men are still taking a piece of the pie. >> i completely get that. but in this case, if mylan said we are rolling back the price in half, we're going to cut it in half, and the consumer ends up not seeing it go down by 50%, you're not telling me that there's not going to be scrutiny placed on the rest of the supply chain to then force them to also do the same? that they're going to stick by the same cut? >> how many segments have we

done on the drug distribution -- >> well, we're doing it right now. >> i'm not going to pick on express scripps or anybody, but the proof is in the numbers, too. record net income and profits for the pharmacy benefit management companies, too. so somebody else is also making money. >> but these are not mutually exclusive. so say that they take too much, and to say that mylan has raised too much, they're not mutually exclusive. they can happen in the same universe and they probably are to system degree. but the net price number that mylan says, what has that gone up in the past five years? >> why do the middle men have to raise prices just because they do? if meg doubles her price, why do i have to double mine? i could keep it the same, because it costs me the same to ship you medicine in a box as it did before. >> right. >> the value of the good is unchanged as a shipment item. >> i get more revenue. >> then they would have a lower margin. and what would wall street do to them with their lower margins? >> everybody along the chain is defending a margin, right?

and they demand certain margin. >> everyone's taking their cut. >> at one point, i remember there was a lot of outrage at health insurers because they made things so difficult for people to get. that outrage still does exist. but you are seeing the focus being turned on drug prices here, and when you have a-hip, the health insurer industry group coming out today talking about other drug prices that have seen their prices increase, i mean, they're sort of gleefully -- they're happy that the focus is being put on drug companies and not on them. >> this is an important point you're also making, meg, as usual, because that's why express scripps language caught my eye. co-pay. think about co-pay. how can a co-pay remain the same, if the cost of drugs, everybody is going up. >> they've taken the cost. >> but yet they're making record net income. >> maybe it's subsidized from some other drug. >> no. come on, you guys. it's insurance. >> so they bill the insurance more. >> this is why insurance groups are going up. >> the insurer is ultimately

paying. >> exactly. >> and that's getting passed on to the, whether-the-the company that's buying the insurance. >> so the pbm here -- >> that doesn't mean the cost hasn't gone up. which means the insurance company's got to raise your rates. >> the system is intentionally cor complica complicated. we all know intuitively that a big game is being played here. you can go, and you can go to your doctor and they will bill $600 for some procedure. take a little precancerous lesion off your hand. she knows, your provider knows, you know that $600 isn't coming back to her. she's going to take $100. it's all a big game. and then you're going to end up paying the same amount. >> she's taking 274 on average. >> whatever. whatever. >> just two little things i would say. insurance exists for a reason to try to defray costs, and insurance through the decades

has covered more and more things. so when you have a third party payer -- when you're suddenly disconnected from the product you're buying, you don't care. now we're back to perhaps the individual absorbing more. which everybody thought would be a good thing because it would force everybody to start -- why am i paying so much for this? >> it is. >> two, i know we want to demonize the distributors, but they provide scale. they negotiate big discounts. in theory, we could get a cheaper price on it than if we were doing it all by ourselves. some of that is passed on and some of that is absorbs as profit. i mean, they exist probably for a reason. >> and consolidation was hailed at the time it was happening. they'll be beneficial. >> there was an april 26th "new york times" story that basically said man, pharmaceutical companies keep jacking up pill costs despite scrutiny. the average price of pharmaceutical drugs in america has gone up 40% in the last ten years. that's in "the new york times" this morning.

i think, melissa, to answer your question of why it hasn't gotten attention is twofold. number one, the epipen is something little kids need. and i think it's not some obscure pill for a weird disease that not a lot of people have. but also, because now these -- and we can say this with our insurance, too. deductibles and co-pays -- >> are way up. >> are way up. so all of a sudden you're going to the pharmacy going, holy you know what, what do i have to pay? last year i paid 50. why am i paying 250? well, because your deductible or co-pay went up because insurance has changed. so i think that light you're talking about shining is going to get a lot brighter. >> and it was by design, and for a reason. to force the discussion about these very things. >> to make the consumer ultimately aware of what the price really was. what the cost really was. >> i also don't think that you can say that there hasn't been attention being paid to this. at least the last two and a half years since i started working here, we've been talking about

drug prices. you've seen investors exit the biotech space because they don't want to deal with this volatility, especially as we head into the election. >> meg, thank you, as always. we've got a lot more to come here. several senators say they want answers from heather bresch. bresch says she called grassley two days ago, hasn't heard back. we'll ask him about that live in the second hour of "power." you're watching a second edition of "power lunch." mylan under fire. we'll be right back.

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welcome back. major averages going pretty much nowhere this hour, but a number of retail names are moving big right now. bob pisani is at the nyse with the latest. >> important thing here, terms, banks, techs, which is the recent leadership group have been holding up. retail has been a laggard here. some good news, some bad news in the retail space. winners, williams sonoma and tiffany. williams-sonoma up, even though they lowered their full year guidance. 50% of the sales of williams-sonoma now online. tiffany did well. they reaffirmed guidance. that's the most important thing, reaffirming the guidance for them. but they've had a tough year. they're down about 10%. if you take a look at the same store sales, this isn't anything to write home about. they talk about tourists not buying as much as they used to. meantime, dollar general and

signet jewelers. that's not a typo. double-digit declines from both. they talked about a competitive environment that has intensified. that's their word. and that means wal-mart. that's what's got dollar general down. signet jewelers, you really want to see how the oil patch weakness is hurting some companies? they had a big miss. look what the ceo had to say here. the decline was fairly broad-based across merchandise categories and was particularly pronounced in energy producing regions. not buying a lot of jewelry in those energy-producing regions. finally, we got the jackson hole summit. two days. and we do get some movement in the stock market here. so over these two days, we asked ken to go back to the summits we've had. financials do very well in just this two-day period. they're up about 1% on average. and materials also tend to be very well. interestingly, those are exactly the two groups that do well in these kinds of days and those are the two that are up right now.

guys, back to you. >> bob, thank you very much. to the bond market we go. seven-year notes up for auction. rick santelli tracking the action at the cme. hi, rick. >> hi, tyler. you know, it wasn't a good auction. i gave it a d as in dog. every way you look at these notes, just a bit disappointing. the market was in the 141 neighborhood. tails aren't good. you want to go the other way. you also want to have yields a bit lower. the bid to cover 2.38, the weakest since christmas of last year. 58.3 on indirects. you know, close to the auction average, but still, the weakest since march of '16, and if you look at the 33.1 to dealers, they were definitely very representative in auction that many of these investors wanted to shy away from. why? i think it's because of what bob said, jackson hole in foul

language. whether it's more bullish on the dove side or the hawk side, it's all about the birds. and i'm not sure, but one thing we know, investors get a bit nervous. that might be the big dampening effect of this particular auction. back to you, tyler. >> thank you very much, rick. more on our big interview with embattled mylan ceo heather bresch. she says the system is broken, and it is to blame for high drug prices. we'll speak to someone who also runs a pharma company about whether ms. bresch is right. and don't miss out, our big interview with senator chuck grassley in the second hour of "power." he's calling for a big shake-up. you're watching a special edition of "power lunch." mylan under fire.

hello, everybody. welcome back to "power lunch." i'm shoe herera, and here's your cnbc news update for this hour. volkswagen says it has reached a deal in principle to compensate dealers in connection with the emissions scandal. the amount of the settlement fund not disclosed. vw's u.s. dealers very barred from selling diesel vehicles for nearly a year. video released by a syrian opposition media group shows rebel fighters lining the streets of the town of jarablus. turkey had sent in tanks to help

retake that town. the national parks service says it's planning on closing the washington monument to the public for nine months to renovate the elevator system. the monument has been closed numerous times, including right now, due to that problem. the fix could cost between $2 million and $3 million. speaking of the national parks, today is the 100th anniversary of the national parks service. it's celebrating by waiving admission fees to all of its national parks today through sunday. you can find a park near you online at findyourpark.com. and they are all beautiful. that's the cnbc news update this hour. special edition of "power lunch" mylan under fire continues next. but, really, it's what you do before that counts. see, medicare doesn't cover everything. only about eighty percent of part b medical costs. the rest is on you. consider an aarp medicare supplement insurance plan insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans,

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welcome back. the dow in the red. the nasdaq is trying to avoid it first back-to-back losses in two months. nike, the biggest loser in the dow right now. >> mylan ceo heather bresch speaking out for the first time since the epipen price hike controversy blossomed in a wide-ranging interview with

brian sullivan today. she said the system is to blame for higher rices. >> there's a list price of 608. there is a system -- i laid out that there are four or five hands that the product touches and companies that it goes through before it ever gets to that patient at the counter. no one -- everybody should be frustrated. our health care is in a crisis. it's no different than the mortgage financial crisis back in 2007. >> let's bring in cnbc contributor bill george, former chairman and ceo of medtronic. and darnesha harrison. developing viral drugs to treat mosquito-borne illnesses. good to have you with us. she made the case that the system was broken. from where you sit, is it? >> we have a different belief. we feel like the system works.

and when you're patient-focused, patient-centric, we really believe as a development stage, to clinical stage company, that goes commercial, when there is a balance of new drugs, innovative drugs being brought into your company, along with those drugs that are older and have already been commercialized, we think the system really works for all those involved. >> i want to come back to how the system works and the role of the fda and whether it's doing its job in just a moment. but let me turn to you, bill. obviously, what we have here is not so much a drug as a drug delivery device that is really at the heart of this product. you worked in the medical device business for a long time and confronted many of the same pricing matters, i'm sure, that heather bresch did. is the system working or not? >> well, no, the system has lots of problems. but let's get down to -- i saw heather's interview this morning

with brian, tyler. and she's in a fire storm. this is the worst firestorm i've seen. it's worse than valeant or theranos or even martin shkreli because it's a coupnsumer produ. it's not unusual for distribution to take 50% margins along the way. you see this in all kinds of otc medications. you go to the store and you buy something, you're going to have huge discounts along the way. i think she took -- she was sincere this morning. she took good steps, tyler, but she hadn't gone far enough. she's got to get the bull's eye off her back. "the new york times" editorial this morning, "the wall street journal," and this show. she's got to get the bull's eye off her back. i think she needs to be much more dramatic. i would roll back the price to its 2015 level immediately. and i would work with distribution to pass that along. >> brian asked her a million

times why not roll back the price. >> i know. >> bill, you distributed products, so maybe you can clear up the discussion that you've been having here. when you guys made your products and they eventually go into my knee or hip, how many people are along that chain, from you to me, each taking -- they need margin. >> well, you better look at your hospital bill and the doctor's bill. you get two bills. so the defibrillator or the spinal equipment is just a small fraction of that. but that's not an excuse. i think she's got to roll back the price. we've got a policy not to increase prices on existing products. i think she ought to commit to no further price increases on this product. i think she ought to go and team up with senator klobuchar. let's make this like the hbs case study. what would i do? what should heather do?

she could go to senator klobuchar and support the bill she's got out there, particularly no pay for delay, so that pharmaceutical companies can't be luke like -- this operates to the benefit of generics. >> to brian's credit, he asked her repeatedly, are you done with price hikes? she said, we've got a business to run. >> she has a business to run. i empathize with that. she could lose the whole thing. that's the point. the big herb issue here, tyler, is there are five senators that have signed off on a bill -- >> we're going to hear from one of them next hour. >> that's going to be a big issue. >> one of the issues here is the speed with which the fda moves product through its system. which is there for good reasons, to keep us safe and to make sure that things are tested before they reach us, and we're proud about that. i think justifiably so. but does it, from where you sit,

move too slowly in terms of bringing new products to market, or in terms of allowing generics to get to market? >> correct. very good question. from where we sit, our pipeline of drugs actually fall under a fast track development plan that the fda does have set in place with set guidelines. so with the emphasis on safety first, an unmet clinical need second, i feel like in the development stages, the agency is really good about safely and efficiently bringing those drugs to market. >> but this drug isn't in the development stage, right? this is a drug that's been around a long time. >> and you are exactly right. and we strongly believe that there is that balance of new innovative products with the long-term drugs that have been on the market so that you can balance price hikes with new and

improved or new drugs for patients and unmet clinical needs. >> when you look at how much revenue the company has brought in, it has gone up dramatically from 2013 to 2016 when it comes to the epipen. we have a graphic that we've bhilt. it goes up and it goes up and it goes up. when you look at the sthats es for the epipen, 824 million in 2013. they're expected to bring in almost $1.4 billion this year. but look what happens next year and the years after that when finally it's expected that competition is actually going to enter the market. their revenues start to go down and fast. a billion per year. then 900 million per year. 800 million per year. we're going to show that graphic any second, i'm sure. but i'm surprised you didn't give any credence to the argument that the fda is slow when it comes to a drug that's been around a long time and allowing generic competition

into the market. >> oh, i'll give credence to that argument. i'll advocate strongly for that. we need to get generics to market faster. there ought to be a generic here. i don't know the details or why they rejected teba, but teba is the largest generic drug company in the world. we should bring a generic product to market. and this is the way it goes. and that's the way it should be. i'm with darnesha, though. you think this idea of accelerating products to the fda that are life-saving products is very significant and what she should be doing is looking for follow-on products and ways to increase her volume, not just increase price. there's too much focus here in just getting the price up. >> did they increase the price in anticipation of generics coming online? >> yeah. look, she's very concerned about the takeover attempt they had

from teba. the fact that they failed on the perigot act. but sometimes you take a hit in the short-term to have that long-term sustainable growth. that's what darnesha is talking about. >> on that note, bill, when tyler asked that question, did she raise the price in anticipation of that competition coming? you were nodding your head yes. >> we caught you. >> yes, likely. and that's the -- that's how you play the game. but in a balanced way, long-term, versus short-term. and we feel like a sustainable and healthy environment in pharma is patient-centric long-term and making sure you can make those strategic decisions along the way with the balance of innovative products. >> okay. you guys are going to stick around. >> it's all about innovation. >> it is. >> we'll continue this conversation. when we come back, we'll hear from a longtime private equity

investor who says heather bresch did justify the price hikes. don't miss our big interview with senator chuck grassley in the second hour. you're watching a special edition of "power lunch" here. "mylan under fire." stay tuned. both on the track and thousands of miles away. with the help of at&t, red bull racing can share critical information about every inch of the car from virtually anywhere. brakes are getting warm. confirmed, daniel you need to cool your brakes. understood, brake bias back 2 clicks. giving them the agility to have speed & precision. because no one knows & like at&t. freshly made in the tokyo-japanese tradition, each batch is small. special. unique... every bowl blurring the line between food...and art. when you cook with incredible ingredients...

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>> i'd give her a b. the company, from what i can see, is really in a harvesting timeframe. harvesting part of their product life cycle. in 2025, the patents expire, and i know they're actively trying to undermine it. the company in 2017 is really going to see at this inflection

point for generic competitors coming back into the market, one of which bill mentioned was teba. we have existing emerging companies. part of the argument would have been more beneficial for her. it's a list price in the 390 to 450 range, versus what their $600 list price is. >> what about her focus on the supply chain and the middle men. did she make that case? is that -- does that justify her putting a list price of more than $600 on this? >> very valid. you know, having experience with the distribution channel and the pbms, they have their return criteria. if you, as a drug manufacturer or marketer want access to their base of customers, you've got to hit their return criteria. same thing with the manage care

companies. they want to negotiate the best price. so you have two constituencies to deal with. the retail distribution channel and the manage care. >> what's the return criteria? >> can you walk us through a product to explain exactly how that works? just a hypothetical. >> well, i've been in front of buyers who actually wanted -- they said listen, if you want on our shelf, it's 40% margin for us. based off the acquisition price. so you get into all these negotiations, and they're quite complex. so dropping the list price really complicates a lot of the contracts that mylan would have. a lot of the criteria that retail drugstore distribution partners and pbms would have. really would create an additional firestorm for her. this in a year and a half is going to be a different market dynamic taking place, if those four companies -- and they are moving quite rapidly, are going

to change. come to market, i should say. so, you know, that's the way i look at it. there's a number of other factors to look at. i would have liked to have had her explain that a little bit more, but we'll see what happens. >> i don't understand why dropping the list price would cause her dribble with the manage care companies. explain that dynamic. so you explained the retail. okay. if i'm going to distribute your product, i'm going to make 40% on it. what does that have to do with manage care? >> well, remember her comment, i think manage care would be okay with it. but remember her comment, she says not everyone would get access if we dropped the list price. so that gets back to access to the product because the distributor is the actual retail locations. but now because of the price drop wouldn't get their return criteria. may not make that product available. they may pull it out of their formula. >> they just couldn't carry it? >> right. she wants to make this generally available. which she is doing. >> but this is the only product out there -- i mean, the

argument is that there is -- effectively they have a monopoly, because it's off the market recalled and another is capacity constrained, they can't make enough of the stuff. so you're telling me a company would actually say we won't carry epipen because the contract -- >> can i add a comment here? >> the margins are not there. they're not charitable. >> can i add a comment here? >> go ahead, bill. >> jim, i have a lot of respect for what you do as a venture capitalist. you're the life blood of this industry. but having said that, i don't agree with you. tylenol gives a huge margin to walgreens when they sell through there. it's natural that any product through an otc, a generic product, there are margins, this is the role of distribution. this is nothing unusual. i don't buy it at all that people would have less access. i think it's just the reverse. you get the price up so high,

people can't afford it. keep the price low. i say roll back the price, commit to no further price increases and get back to innovating on the next generation. >> the reason why it's such a huge fire storm is it gets back to the regulatory aspect. the other part is obamacare. if an obamacare approved bronze or silver plan, the first $3,000 to $6,000, you have to come out of pocket. your individual health insurance plan. that means 20 million people have to come out and pay that amount. that's really what's causing this fire storm. fire years ago, when it was $150, it wasn't such a big deal. today at $600, it is a big deal. >> one stat, and then a question to darnesha. i was just doing this in the commercial break. revenues, guys, for everybody, aetna, significant that, the pbms, cvs care mark, express

scripps, mylan, they're all up big in the last few years. so let's be clear. you don't have to have an opinion. everybody is making more money, except the consumer who's spending more money, like jim just talked about. there's your disconduct. >> tyler -- we were talking about what percentage of the s&p 500 -- >> of the fortune 500, seven of the top 25 companies are either in the drug distribution or pharmacy benefit business, from mckesson to cardinal to cvs. that was not the case, i'll wager, ten years ago. >> i know you're a young company, so you're not going to slam the government. that would be bad for you. however, you mentioned adrenaclick. capacity constrained, too. somehow there's a law or a regulation, adrenaclick apparently has two caps you have to remove to use it. epipen has one. >> it's easier. >> pretty much the only

distinction. but because of that distinction, you have to have a new prescription for the adrenaclick instead of the epipen. >> right. it's not interchangeable. whereas the teva one -- i understand. you're talking about a direct interchange. there is no direct interchange for epipen on the market. >> my point is there's an example where you've got seemingly an innocuous difference in a difference of caps creating effectively -- helping create monopolies. >> yes. >> what's the difference between safety and stupidity? >> well, here's what i will say. there is a competitive advantage here with epipen. hands-down. and i do believe that mylan will ultimately make the ultimate right decisions. but you've got to be able to play. and i stay consistent with this. the long-term and the short-term.

and how do you do that? by having a very rich, innovative timeline. >> what is the right decision? >> the right decision for -- for patient-centric, and the balance. and that's the long-term, in my opinion. the unmet needs. who are the patients that need this product? and giving them access. and then you balance that. >> but imbedded in that answer is that they're not doing that right now. they're not patient-focused right now and they haven't made the right decision right now. >> i think that long-term, it's really hard to stay patient-focused if you don't have the right innovative partner. >> bill, i'm so sorry. it's been a good discussion. >> stop passing the buck, guys, and roll back the prices. >> cut out the middle man. >> thank you, lady and gentlemen. folks, don't miss out on interview with senator chuck grassley in the second hour of "power." he's calling for a shake-up in this system. you're watching a special edition of "power lunch."

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narrator: it wasn't that long ago. years of devastating cutbacks to our schools. 30,000 teachers laid off. class sizes increased. art and music programs cut. we can't ever go back. ryan ruelas: so vote yes on proposition 55. reagan duncan: prop 55 prevents 4 billion

in new cuts to our schools. letty muñoz-gonzalez: simply by maintaining the current tax rate on the wealthiest californians. ryan ruelas: no new education cuts, and no new taxes. reagan duncan: vote yes on 55. sarah morgan: to help our children thrive. let's take a look at shares of mylan. we should note that the stock was up more than 2% intraday. it has backed off of most of

those gains. we do have a big interview with senator chuck grassley coming up. he wants big changes in terms of what mylan is doing, and also perhaps to the fda as well. stay tuned for that.

good afternoon, everyone. welcome back to a special

edition of "power lunch." i'm tyler matheson. here is what's on the menu this hour.isen. here is what's on the menu this hour. mylan's ceo says congress needs to fix this. and we will talk to a senator who's squarely in the middle of it, chuck grassley, republican of iowa. and what role do pharmacy benefits managers have in the high prices of drugs? we'll cover that angle. and did heather bresch make her company look better or worse? will public perception of mylan improve? all that coming up on a very busy second hour of this "power lunch" special edition, "mylan under fire." i'm michelle caruso-cabrera. let's get you a check on the markets. the dow, the nasdaq, and the s&p 500 in a very tight trading range. there is action, however, in retail. dollar general taking a big hit after disappointing in its

earnings report. and dollar general going along for the ride. the stock is taking -- and the stock that everyone is talking about, mylan, is actually slightly higher right now last we checked. by 25 cents. well-off its earlier highs, still down, though, 10% in a week. and i'm melissa lee. the headlines at this hour, most systems are back up and running after ground stops at miami international airport and other south florida airports. the faa says the issue was related to a power problem. folks wagon has reached a deal to compensate 650 auto dealers over the emissions scandal. according to the company's lawyer. a judge ordering settlement talks that could require buybacks of 85,000 vehicles. aftershocks continuing to hit central italy as rescuers hope to find survivors. the latest reports say 250 people were killed, 365 injured in yesterday's earthquake. the big story right now, is mylan firing back to the outrage over the epipen price hike?

we sat down exclusively with heather bresch, and i began by asking her, why the life-saving drug cost more than $600 in some cases. here's what she told us. >> we showed that graphic. it's basically five people in between, the pharmacy benefit managers first, the retailers, the wholesalers, everybody's taking a big cut. if i'm hearing you right, you're saying you can't cut the price because they won't cut their prices? it seems weird. >> there's no question. the system is broken. your products aren't going to get to patients because of the lives covered by all the middle men you just talked about. so yes, my point is patients are paying right now twice. they're paying full retail price at the counter, and they're paying higher premiums. >> you understand the headlines, right? which is epipens, which are needed by millions of children, the price goes from $50 ten years ago to five or 600 today and you're making $18 million a year. you understand how that looks. >> brian, look, i understand

better than anyone that facts are inconvenient to headlines. >> so how did bresch do? did she make her case? back with us is the management expert susie welch. good to have you with us. >> thank you. >> you yesterday said she needs to get out there and talk, and she did. >> she must watch "power lunch." look, she came out swinging, and i thought that was good. it was a tough, tough interview. and she held her own. i think i'd give her a b. it's a start. that can't be her only statement. my problem was she had too many messages and she was sort of all over the place. congress needs to step up. there's a lot of people involved in this. and she mentioned she was a mother several times. that sounds inauthentic. but she was out there. instead of hunkering down, which is typically what happens in these kinds of crises, she got out there with the company's story. i wish she had said something about her team and the people who work in mylan.

i wish she had said i'm sorry that my company are under attack for being greedy, because these are the hardest working, most dedicated individuals i know. i wish she had apologized and said i'm sorry if any family in the world has felt anxiety over this number. >> that was going to be my question. should she have said "i'm sorry"? if so, to whom, and does she have anything to be sorry for? >> i do think she should feel sorry about her people. here are people who work for mylan, who go in every single day and are being called greedy and awful and outrageous. i think she owes them an apology. she definitely owes an apology to any family that was caused a terrible anxiety by this. but really, in terms of pure optics, showing some kind of contrition could not go wrong. but she did have a complex story to tell. probably she was telling too complex a story because she was speaking to multiple audiences. she was definitely also talking to her shareholders and saying look, i haven't forgotten you. we still have a business to run. so she was saying a couple of

things at once. maybe she should have talked directly to the general public with this initial foray. >> and her board. i'm sure she was talking to her board, at least subliminally. >> absolutely. she's hearing multiple voices in her head. some of them very loudly. and i think that she -- i thought she started out sort of weak, and then picked up momentum. i didn't walk away from it with one message. what i should have walked away with is she's going to fix this. >> brian asked her why not just roll back the prices, but what they announced was that they're going to increase the rebates that people would get so that way they would have a lower cost, ultimately, for the product. were you satisfied with that? how should she have done that? >> it would have been much simpler, much clearer answer if she just said we're going to lower the prices. instead, she said a version of that, which was we're going to make sure that this drug is affordable to every single person who needs it. again, a little bit of parsing of words. but a reassuring message. then she had the larger -- the

whole system is broken. she had to satisfy people who said you're gouging. she could have been more direct and said this drug is going to be in the hands of every single person of needs it. >> i learned a lot in the research for this interview, because we're tv anchors. we don't know a lot about anything, we know a little bit about everything. that's how we get to our job, in four-minute increments. which is you can pay to block in this industry. if i've got a drug -- >> that's a new entrant. >> i can actually pay you to not challenge my -- it's unbelievable. you can do that. but mylan or pfizer or anybody, they didn't set that rule. they probably lobbied for it. but they didn't set that rule. that is the government. that's the fda. those are the ones making the rules. the competitor out there, it was actually more expensive than the epipen as well. so you've got these markets which are sort of artificially controlled by the government. >> right. >> but how do we fix that?

because we can bash mylan or pfizer or whoever the hell we want all the time. but how do we fix the problem? >> it's a huge systemic problem. and she started to say that. she started to say you know, there's all these people between us and the patient, and she said, you know, that list price was never supposed to be paid by the customer. that was sort of a learning for me, as she said it. but she was trying to educate at the same time as making her case. but a lot of issues start coming into this. her salary. and the inversion. she came out with a lot of guns blazing at the same time, as people are just learning about how drugs are costed out. >> do you think she sounded like she was deflecting a little bit too much by placing the blame on the system to the extent that she did? >> she should have owned some responsibility. that's for sure. she should have simply said we definitely made a mistake with the way we went forward with this. i wish i had done x, y, and z. but i don't think she was wrong to say part of the system holds some responsibility for what went wrong here, because the

system is responsible for some of what went wrong here. >> suzy, you've studied business a long time, you're a smart person. do you understand how drug pricing works? do you understand how your insurance plan works? because i sure don't. >> does anybody? i don't either all the way. i understand some things, like it's very complex and there's a lot of middle men. >> i understand that. >> but that's about it. she kept on saying this is complex. this is complex. and the problem is she didn't move anybody that much more forward in understanding. i don't know if any of us will ever fully understand it. >> i pointed out in the last hour that seven of the top fortune 500 companies measured by revenues are in the drug distribution business from cvs, walgreens, so on and so forth. you know what's not in the top 25? not a single one? pharmaceutical company. not one. >> interesting. >> not a one. >> everybody thinks they're the ones who are going to be in the big -- >> not pfizer, not merck, not one of them. >> they exist for a reason,

right? if a pharma company had to do all its distribution and run the trucks to get it to walgreens, and that's not their core capacity. we want them inventing the drug. >> and michelle, you make an interesting point in that it was quite late in the interview where she actually said to brian, look, we have poured hundreds of millions of dollars into developing this drug. and it was sort of like, oh, really? because i thought you just sort of bought this company. and suddenly she's saying that they had invested? and that was a point i wish she had mentioned more, that they had costs. >> yeah. they changed some of the way that the needle works apparently and the packaging and stuff like this. but let's go back to amazon. you know, it used to be a book. i'd write it. michelle would publish it. two or three people would ship it to tyler's bookstore. amazon said -- and everybody's taking a cut. amazon said why are we doing that? change the model. pharmaceuticals, and a lot of other things, by the way, seem to be stuck in the pre-amazon

days, which is kind of what heather i think was trying to get at with the graphic, which is everyone's taking their cut. in this day and age, why does it seem this industry is barney rubble? >> it's hard to compare anything to amazon, because so few companies have a ceo and shareholders who don't care about profits for the time being. and so amazon -- it's hard to compare. the pharmaceutical ceos and their shareholders would like to see some profitability, apparently. it is an industry that people have been saying for decades is ripe for disruption. and what is going to be the tipping point for that disruption? maybe it is a company like amazon. but it's going to need shareholders who are ready for a rocky ride at the beginning. >> all right, suzy, we've got to leave it there. suzy welch, appreciate you being back two days in a row. >> thank you. let's get back to those middlemen. express scripps getting hit hard today. following that interview, the stock is down almost 5% today on

the day. express scripps releasing a statement saying in part, our patient's co-pays have remained stable over the last 18 months on epipens, the average of 73.03 versus 73.50 of last month. let's bring in the senior equity analyst at morningstar research. as i pointed out earlier, the fact that co-pays are remaining stable, it's kind of overly specific language, because their revenue and their profits have gone up. and i'm not picking on express scripps. they're one of the only pure play sort of pbms out there because care mark has rolled up into cvs, so the numbers are a little cleaner to look at. the co-pays may have stayed the same, but somebody's making more money somehow. >> well, i think what you have to take a look at, it's not necessarily just the top line or the revenue line. you have to dig down into the numbers. when you do that, express scripps makes about 4% or 5% in operating margin. actually, their operating margin has gone down over the last handful of years.

same thing with cvs. if you take a look at mylan and its operating margin on especially especially alone is 50%. and that's been consistent -- that's been steady since that product has come out in the market. so if you take a look at the profit margin for mylan, it's about 20%, 15%. if you look at the middle man, so-called middlemen, they're single digits at the most. >> why? >> in the distributor's case, it's low single digits. you have to take a look at the profitability of these companies. you don't have a single payer system here in the u.s. so the government does not dictate all the terms. like most other western developed countries. so you have to have folks in the middle here to dictate exactly what the pricing is, what the products you can get are, and get these products efficiently to the end consumer from the manufacturing facility. without the distributors, without the pbms, without the insurance companies, that's not possible. >> why are their market caps so much bigger than relative to pharmaceutical companies, when

you look at their percentage and where they are in the s&p 500? >> well, they have to be bigger. they have to dictate pricing to these pharmaceutical companies. if you left it up to the pharmaceutical companies, i'm pretty sure these pricing inquiries will still be intact. i saw the graphic you put up and i saw what mylan's ceo was talking about this morning. i would have to argue with it a little bit in terms of the other end or the seconds piece of that whole flowchart, where you saw half of it going to mylan and half going to the middle man. basically that's a list price. no one pays a list price within the u.s. the discount there. co-s down to where you pay a little bit of a percentage above what mylan is making. but again, numbers do not lie. you look at mylan's 10k. 50% margin on epipen alone. 20% operating margin consistently year in and year out. when you look at the distributors, even the manage care companies, they're in the low single digits. and the whole process and the whole value chain, and the reason why they exist is because

they do these tactics, or these activities in terms of bringing drugs and products and services to the consumer a lot more efficiently than thousands of pharmaceutical companies can do on their own. >> but their stocks are getting hammered. are you prepared now -- a lot of these pharmaceutical analysts have had to become political analysts, just like the biotech analysts. and you've seen what's happened to the stocks today. they're next going to be in the target of everybody, not just the media, but the political class as well. what do you do with these stocks? >> well, if you take a look at it from the point of view of the pbms in particular, let's look at those. the government itself, for its own health care programs, if you look at the v.a., if you look at their federal employees program, you look at the defense department, the dod and tricare, they all use pbms. they all do for their own pharmaceutical distribution and their pharmaceutical activities. and year in and year out, when inspector generals have gone into these contracts and taken a look at them, they have stated that the government has saved

itself with its own programs millions of dollars annually because they have pbms as part of the prescription drugs. that's a fact. and i think there's a lot of shifting of blame here. >> you say that you're comparing operating margins. mylan, they don't really develop a lot. but you can't compare a pharmaceutical company, which is paying ph.d. biochemist scientists a lot of money to maybe develop something that will work in ten years, versus a company that moves boxes. >> well, it's not moving boxes. >> you get my point. the margins have got to be lower -- it's not a scientific field necessarily. >> right. but you can't complain. i'll push back on you. you can't really complain about your pricing, you have to price at a certain level, when you're making double, 50%.

consistently. and i'm not picking on mylan alone. a lot of these pharmaceutical companies look at it this way. gilead with its hep c, harvoni, when you take a look at other pharmaceutical companies. they're high for a reason. you do make a good point. the rnd, the research. >> this is cnbc. we've got some very capitalistic viewers. i'm getting e-mails and comments from some people that go the other way, that these should be more expensive, not cheaper. it sounds cruel, but their argument is, and you would probably agree with this. that that will push other people into the market. >> the more profitable something is, the more you get of it. >> others start salivating and soon you've got a lot of competition and ultimately prices fall. why hasn't that happened? >> well, a lot of these drugs are quantum leaps in terms of -- >> no, no, for epipen. >> but this has been around for years, the epipen. >> a lot of times, it depends on -- and i'm not a pharmaceutical analyst, i cover

the services space. what i can tell you -- and i agree with you. what i can tell you is if there's a lot of economic return, you're going to get some more competition. obviously the competition hasn't arrived yet because there's not enough economic return in many of these treatment areas. if you take a look at what mylan has, mylan puts out about 3.4, 3.6 million prescriptions a year. that pales in comparison to the 5 billion that's produced annually within the u.s. in terms of the number of prescriptions. so it's a very small piece of the pie to begin with. when you take a look at the attractiveness of the market, there may not be enough room there for another competitor. that's why you have these situations developed. >> i want to get back to michelle's question about whether or not these stocks will endure more scrutiny. you seem to answer that because the pharmacy benefit managers have saved the government millions of dollars that somehow they're going to be more immune from scrutiny? what are you getting at here? >> i'm a stock analyst. i'm not going to defend any specific company or industry.

what i can tell you is there's a reason why these companies exist in the market. there's a service they provide. most of their clients are large insurance companies themselves. so these large sophisticated insurance companies saw fit to third party outsource the management of their prescriptions to another company. but doesn't mean that they're not going to go through a lot of scrutiny. obviously they will. it's election year. congress likes to have topics and have issues -- >> are you saying you buy these dips, or no? >> i would definitely buy the dips. >> definitely buy the dips. okay. got it. >> definitely for you and your viewers, express scripps is undervalued. >> you know what that means. if you're wrong, melissa is going to have you back. >> go right ahead. coming up, fed chair janet yellen set to speak tomorrow. is a rate hike coming next? we'll go live to the big fed meeting in jackson hole, wyoming. special edition of "power lunch" rolls on.

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welcome back to "power lunch." i want to take a quick check shares of mylan. it's now down for the day. keep in mind that on the heels of brian's interview with the ceo heather bresch this morning, the stock had been as high as a plus-2% or so but now has turned negative, below the session that was below 43. so we'll be watching the stock into the close here. in the economic world, all eyes are on the big meeting, the get-together out there in jackson hole, wyoming. it is getting under way. tomorrow is the real main event. and steve liesman is there.

hi, steve. >> tyler, thanks very much. i'm here with the chairman of jp morgan international, former governor of the bank of israel, and not such an old man, but a man that's been coming here for 31 years. so the man i can put the question to, jacob. we're meeting here, a little bit less sense of crisis than the past several years. now it seems like the question is this. should the fed be raising rates, and how quickly should it be doing it? what would you be advising janet? >> well, indeed, there is less of a sense of crisis. but we should be aware there are some that are building up and one should be very careful about keeping the situation where the fed is the only game in town. there are a lot of things to do in the structural area and the fiscal area. what would i advise janet to do? first of all, it is the federal market open committee, so it's not a single person decision. but i think that by and large, i would -- i don't normally give advice to central bankers, being

a former central banker myself. but i believe that it's time to move ahead with the normalization. there was the first step last december. everything that was supposed to happen positively has happened. labor markets have improved. unemployment now is 4.9%. participation is improved. household is much stronger than what it was before. consumption is higher. yes, there is some fixed investment. >> do you do this rate hike before the election? do you think that's something that they should take into account? or are they taking it into account? >> i don't know if they take it into account. i think it will be a mistake to take into account the political process. not because it is irrelevant for the economy. but because this will actually be the -- it's extremely important to keep the monetary policy independent of the political crisis. >> do you give that same advice when japan and europe are both

negative? isn't that moving too far away from our competitors when it comes to the overnight interest rate? >> the mandate of the federal reserve is to focus on the united states, and of course, it looks at the rest of the world to the extent that behavior and developments there impact on the medium term developments in the united states. the mandate of the fed is the united states. the united states is improving. there are some headwinds and there are some risks, but they are not in the control of the fed and they will always be these kind of risks. these risks today, by the way, affect negatively fixed investment. household is improving. fixed investment is not. why? there is a huge amount of uncertainty. of course, in the geopolitical, in the u.s. election, but also, what the fed will do in the regulatory frame work. in other words, we should reduce uncertainty rather than increase. >> speaking of uncertainty, there's been a lot of criticism

of the federal reserve. former fed governor kevin warcsh called the fed erratic. our survey says that people think the fed is not operating under a framework. is there a framework that the fed is using? does it need to really do a much better job in communicating and figuring out policy? >> let me start by saying i am a great fan of the fed. the fed has done extremely important -- played a critical role since the crisis. one can always argue about this step and that step and about timing. being within this framework, i think that it's extremely important that the communication of the fed is such that you and i can guess what the fed will do, or can analyze what the fed will do. i believe that the fed has basically said to all of us we want to normalize. and it's said here last year, we

will normalize when the economy is robust enough. we look at labor markets, etc. i believe that some of the arguments that were made to delay the normalization, whether it was brexit, whether it was china, whether it was exchange rates, whether it was stock markets, those were probably -- i would not pay so much attention to them, and i would go ahead with my mandate and with tnormalization. financial markets now are moving on their own steam, and they will need to be adjusted once the rate goes up and that's dangerous. >> jacob, i have to leave it there. >> thank you. >> thanks very much. hey, tyler? >> yes. i'm here. >> if you're there, just a real quick happy birthday. just so you know, it's the 100th anniversary today of the national parks system. >> and i am coming out to where you are next week, yellowstone and grand teton and i'm going to celebrate. >> i believe it's been called the greatest idea america ever had. so here we are.

happy birthday to the national parks system. >> how cool is it out there? how chilly? >> it's chilly. i'm wearing a couple fleeces, my friend. >> planning your vacation on television. very efficient. >> there are weather apps. >> thank you. coming up, heather bresch saying that congress can fix the problems leading to high drug costs and she wants to explain how. >> i reached out to senator grassley, klobuchar, senator warner. >> you've reached out to them? >> personally. >> in the last when? >> two days ago, i called them and said i welcome -- >> what did they say? >> they haven't called me back. >> we called them, too. and he called us back. he's coming up in about ten minutes. we're going to speak with chuck grassley about this issue as the special edition of "power lunch" rolls on. energy is a complex challenge. people want power. and power plants account for more than a third of energy-related carbon emissions. the challenge is to capture the emissions before they're released into the atmosphere.

exxonmobil is a leader in carbon capture. our team is working to make this technology better, more affordable so it can reduce emissions around the world. that's what we're working on right now. ♪ energy lives here.

hi, everybody. i'm sue herera. u.s. olympian ryan lochte will be summoned to testify before brazil's justice department for lying about being robbed at gunpoint at the rio games. if he doesn't show, the process will continue without him until there is a final sentence. amazon launching a new site

within amazon.com today to help car buyers find and compare autos. amazon vehicles allow users to research cars, trucks, and auto parts before they buy them elsewhere. it also includes customer reviews. donald trump joined by dr. ben carson as he met with african-american and hispanic conservatives from the new york area. he told reporters that he'll continue to emphasize outreach to the black community. >> people are hearing the message. a very important part of the message for me is the african-american community. because they have really been let down by hillary clinton and the democrats. >> the clinton campaign promising to pay for hillary clinton's flight aboard air force one with president obama for a major campaign appearance last month. a cnbc review of clinton's federal election commission filing showed that the campaign had not yet paid for the july 5th flight to north carolina. you can check out the full details on cnbc.com. that's the news update this

hour. brian, back to you. >> all right, sue, thank you very much. now back to your top story today. mylan under fire with the price increases for the epipen. the stock turning negative. it is about down .4 of 1%. the company ceo heather bresch telling us exclusively this morning that her company is not the only one to blame, that the entire system is broken. now, she does believe congress can fix it and says she wants to tell them how. >> the leaders, the senators, i've called all of them. i want to have a face-to-face meeting. price is one part of the problem. >> because a bunch of bipartisan senators would like to speak with you as well. >> well, that's good because they haven't called me back to set a date. >> have you reached out to senators? >> i reached out to senator grassley, klobuchar, senator warner. >> in the last when? >> two days ago. i called them and said i welcome -- >> what did they say? >> they haven't called me back. >> when is the meeting? >> they haven't set it. i said as soon as you can meet, i'm there. >> joining us first on cnbc is

senator charles grassley of iowa, chairman of the senate judiciary committee. thanks so much for joining us. >> thank you, melissa. >> did heather bresch call you? why haven't you called her back? >> i think somebody from the company called my chief of staff. they had a conversation. and what i'm waiting for is -- and i gave until september 6th. maybe i shouldn't have given that much time. but i'd like to have it in writing, so i want an answer to all the questions that i asked of the company in my monday letter. and i'm going to wait until then and read on paper their justification for these increases, gigantic increases that they've had that i think are unjustified, and at that point, then we'll have the conversation that she wants to have. but i want my letter answered. >> a key part of her thesis as to why these prices had to

increase are the middle men in the system. senator, do you think that you're also addressing that aspect of the price increase problem, that there are other people involved, not just the companies that actually make -- the companies that distribute the drugs, the companies that ensure the patients? >> if you're asking am i looking at other things right now as a result of mylan's price going up, the answer is no. but we do need to consider all the questions that you just raised in the whole area of comprehensive review of the pricing of drugs and get everything out. transparency and things of that nature i think are very, very important. but in this particular instance, we got one company with a no noply on the product going up more than 400%. one family with four children that have this problem. it could cost $2,000 a year for

that treatment. >> it's michelle here. you're right to bring up this issue of competition. when you look at the revenue that they've been able to bring in, back in 2013, it was 824 million. this year, it's expected to be 1.3 billion. however, once there is a gentlemener in uk on the market next year, the revenue on the epipen starts to fall dramatically. at least that's what wall street expects because there's going to be more competition. why is the fda so slow in allowing other competitors into the market? >> okay, well, you probably are aware of the fact that two days later, i did write a letter to the fda. i had four other senators signing it. wanting to find out several things. one, there was some competitors that didn't get approved by the fda. we want to know why they were not approved. we want to know whether there is something in process to approve some competition for the same product because competition will

draw down the price, and we want to know whether that process can be speeded up to get competition to market. because i think one of the reasons mylan had the guts to move this price up so rapidly is because they do have a monopoly, and about 40% of their clientele is medicaid, so they can cheat the taxpayers as much as they're cheating individual families, so they're putting out this $300 gift certificate, or whatever you want to call it to help families, but are they putting it out to the federal government so they can save taxpayers' money the same way that they want to make it a little bit cheaper for the families. if they can put out a $300 gift certificate, why can't they put out -- just lower the price? but right now, these are all questions. i'm waiting for an answer to my letter. >> can i jump in? it's brian sullivan. i asked her just that question. i said what's this rebate?

why not just cut the price? >> yeah. >> and her answer -- and i don't want to speak for her. it was a couple hours ago. it seemed to be basically because of all the people in the middle, that if she cuts the price, that they may not and the consumer wouldn't get as much of a benefit from the price cut as they might from this rebate. you can agree or disagree. that was her rationale. >> well, there is one need that i would agree whether mylan raises it or anybody else raises it. most often, it's raised by the small town pharmacist that they have. but the pharmacy benefit managers have a great deal of secrecy in how they price things and how they make deals and contracts with users. i think there ought to be more transparency on a benefit managers as well as asking for transp transparency on the part of mylan.

>> which is one of the things ms. bresch said, she wanted more transparency in the process throughout. >> sure. >> she basically agrees with you on that. invariably, senator, when we talk about drugs and drug pricing, the issue of the ability of government programs, whether it's medicaid, which you mentioned, medicare, or the children's health insurance program, to negotiate prices with pharmaceutical companies comes up. would that help in this case? would it help broadly? where do you stand on that idea? >> well, i think it's one way to look at a company that has monopoly. there might be some reason for the government to step in. i'd rather have the marketplace work, but if you only got one person producing it, then that creates problems that maybe the government ought to look at. but if you look at the way that you just suggested or other people are suggesting it should be done by having the government negotiate, that's the way the v.a. does it. you can drive down prices, but

the government doesn't negotiate, government dictates. when government dictates, in the case of the veterans administration, they end up with about a third of the formulary that you have in part d medicare, where the marketplace works and where you have a lot of competition, and the competition itself has brought down the price of drugs tremendously. >> senator grassley, how far do you go with mylan? i ask you this, because epipen has really touched a nerve in this country because it's often used in children, found in classrooms, etc. but mylan actually has a list of other drugs that have gone up 400%, 500% in the first six months of the year, this according to wells fargo. do you go down the list of their product portfolios and say this one also? add to the list this one. how about this drug for irritable bowel syndrome. how far do you go for this company or even others that have raised their prices in commensurate percentages? >> well, i've been involved in

negotiations on drugs that cost $90,000 a year for some people that have hepatitis c as an example. we find out that when you bring public attention to it, as we brought public attention to mylan now and have a very bad public relations problem, and they're immediately trying to solve it by getting the ceo out there or getting these gift certificates out there to quiet people down, transparency brings accountability. and right now, i'm going to tackle this one drug at a time. because i think that the extent to which we can bring governmental pressure indirectly through the bad public relations, some of this pricing, and the decisions that go into the pricing, like in hepatitis c instance i talked about, i think that that's a better approach. so many people in congress would

say government regulation. i don't like very much government regulation. >> it sounds like you're saying that you're satisfied, though, with jawboning, so that there are individual cases such as gilead and the hep c treatment. such as touring. where a bright light is shined by congress and others in the media, etc., etc., and they are jawboned into lawering the erlo prices. then it seems like the spotlight goes away. is that what's going to happen this time? >> no, i'm talking about one instance that came up here that's unjustifiable, that we're looking into, and we hope we can accomplish some good by getting reasonable pricing. but you're bringing up a very legitimate question that's much broader, and i think that has to be brought up in the context of general health care reform. whether it's dealing with pharmaceuticals or the whole health care delivery system. >> another broader question that's come up as a result of this, senator, is that the united states is the only country that really pays for

rnd. there are price controls on drugs in advanced companies around the world. and why isn't congress more aggressive in trying to use the wto. we realize price controls are bad, right? we learned that in the '70s in the united states. we're learning every day with venezuela. they're suffering massive shortages. the rest of the world seems to think price controls on drugs are okay. the risk is that we end up imposing price controls, and what's going to happen to innovation in the pharmaceutical industry? it will drop dramatically. why don't we force other countries to say hey, why is it germany that you think you deserve cheap drugs? your people live very well on very high incomes. >> you've kind of put a summary on a lot of speeches i've given on the floor of the united states senate. it doesn't come in conjunction all with the tool you suggested we use, the wto. it comes with the issue in congress of whether or not there ought to be one consumer product

in the united states above all consumer products that you can buy from overseas, why do we have a prohibition on importing of drugs? i have worked with senator mccain and other senators on this issue. i voted for doing away with that prohibition. if we do away with it, we will have more prohibition from around the world to drive down our pharmaceutical companies and our pharmaceutical companies that go to germany. that's the country you named. they go to germany. and they get a big volume at a very low profit. let the germans pay for some of our research via our companies getting more money out of the germans. >> we'd love to talk about low drug prices in canada, but there's really not any canadian drug companies that are creating blockbuster drugs. great country, they're just not doing it. my guess is you may want a hearing or inquiry with mylan or

other pharmaceutical ceos. will you also call in the drug distribution and pbm companies into a hearing? >> we need to look more at 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. at that point, if an answer isn't legitimate, and the prices don't go down, then we'll talk about having a hearing. we could get into that as well at the same time, but i'm going to make that decision after september 6th. >> senator grassley, thanks so much for joining us here on "power lunch." we appreciate your time. >> thank you. coming up on "closing bell," senator amy klobuchar, democrat from minnesota, she will weigh in on this epipen controversy as well. you're watching a special edition of "power lunch." express scripps, guys, now down 5.4%. we're back right after this. announcer: when they test you, stand firm

and move only when you hear the seatbelt click that says they're buckled in for the drive. never give up till they buckle up.

welcome back to "power lunch." s&p multi-line retail is standing out as the worst performing industry group in the s&p today, off by more than 6%. and is being led to the downside

by shares of dollar general. the stock is currently at session lows, down by 17%. the discount retailer's quarterly results and same store sales both miss analyst estimates. shares are on track for their worst day ever since going public in 2009. back to you. >> thank you. a lot of negative publicity has hit health care stocks recently, not just mylan. should that scare you away or encourage you to buy these dips? we've got the "trading nation" team on tap, next.

all right. yet another headline just crossing in the health care space. let's bring back meg tirrell with more breaking news. meg? >> brian, we are hearing from the benefits pharmacy management group responding to mylan's claims that it is the middlemen, the pharmacy benefit managers and payers contributing to the rising cost of prescription drugs saying the blame the victim strategy will not pass the laugh test in washington. they say, quote, it was a mistake to adopt the failed pr strategy used by valaent and touring. it is not credible to attribute it to the employers. unions and government programs that work hard to provide

affordable coverage. they say mylan is latest drugmaker to reframe the problem into a coverage problem. as we have seen today, all of this focus on the middlemen here really weighing on shares of these pharmacy benefit managers including xpress scripts, brian. >> i fine it a little bit odd. forget the industry. any time an organization, a, comes out and says that hundred billion dollar corporations are victims, they have a market cap twice as big as mylan and cvs care market with a cap five times that of mylan. somehow they're the victims. i mean, in any case, $100 billion corporation is a victim is itself a novel concept. >> i think they're pushing back on the idea that -- well, interestingly you're right. the blame the victim strategy is not 100% clear to me who they're

referring to as the victim there. here they say those paying the bills, government programs, may be who they're referring to there but we should be talking with xpress scripts and ask them about this very soon. >> she has a point in the idea that she -- heather bresch, and mylan didn't invent the system. they're playing -- right, meg? >> correct. >> the way drugs are brought to market. >> yes, absolutely right. >> they didn't invent it. >> no. mylan is not unique at all in participating in this system. and big criticism coming out today that we have been discussing quite a lot is there's no transparency here. we don't know how much money is kind of lost in the system and between what you see is the list price of a drug more than $600 and then what the net price is that the pharmaceutical company putting in the pocket. so that's the transparency focused on today and that's why you're seeing all of these

supply chain players starting to become more volatile. there's concern here that more pressure on drug prices will affect them, too, and that hasn't happened before. >> the association says we save taxpayers, people hundreds of billions of dollars every year by negotiating lower than the list price on these drugs. correct? >> that's right. the argument -- >> what they say. >> that cvs do negotiate drug prices. and so, the drug industry says you can get a higher discount raising the price. you get a bigger discount and the rest of the supply chain is feeling the pain today, as well. cardinal health down. part of the supply chain there. >> i mean, meg, when's interesting is that the statement from this association that represents the pbms is very strong and almost strident that there's no room for them in this blame game, not to say they'll

come out and accept blame, per se, but for them to come out and say the blaming them for price hikes is a red herring, that's -- they're really digging the heels in on the eve of what could be, you know, congressional hearing that involves them. >> that ice right. we see d see a representative of the pharmaceutical care management group. they were participating in one of the previous senate aging committee hearings on drug pricing but the fire was not held to their feet. they were not the ones that were really getting the hard questions. that was the drug companies. >> thanks, meg. >> thanks. all right. coming up on the "closing bell," you will hear from express scripts chief medical officer steve miller. that stock is now down 6% as it appears, guys -- >> session lows. >> the battle of pharma and pm -- pbms may have officially

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enepeople want power.hallenge. and power plants account for more than a third of energy-related carbon emissions. the challenge is to capture the emissions before they're released into the atmosphere. exxonmobil is a leader in carbon capture. our team is working to make this technology better, more affordable so it can reduce emissions around the world. that's what we're working on right now. ♪ energy lives here. shares of mylan off session lows right now. brian, your interview of heather bresch poured fuel on the fire. >> whatever you think of the company, her, anything, maybe this will shed light into the dark world of drug pricing which hopefully we can do. >> i hope -- we shouldn't demonize profitability. you get lots more profit and --

>> hopefully more competitors coming in. >> that would be much better. >> in search of profit. >> yes. >> but the problem is barriers to entry have clogged the system. but you're the only broadcaster she spoke to, brian. congratulations. >> great interview. >> thank you. >> a fellow virginian. >> "closing bell" starts right now. hi, everybody. welcome to the "closing bell." i'm kelly evans at the new york stock exchange. >> i'm mike santoli in for bill today. investors focus on jackson hole as fed officials begin to speak out ahead of the speech on friday, tomorrowment we'll take you there live. >> mohamed e erian will join us and says central banks are becoming less real haven't. >> getting to be a loud and crowded case being made. >> pressure on