Mylan To Pay $465M To Settle EpiPen Medicaid Pricing Scandal; Critics Call Deal “Inadequate”

Image courtesy of M

Amid recent revelations that EpiPen maker Mylan has been overcharging U.S. taxpayers for potentially hundreds of millions of dollars since at least 2011, the drug company says it has agreed to pay $465 million to close the book on a federal investigation into its Medicaid pricing — all without admitting any liability.

To quickly recap, drug companies whose medications are purchased by Medicaid reimburse the program through mandatory rebates. The rate of those rebates is based on whether the drug is an “innovator” medication (often a newer, higher-cost drug with little or no competition) or a “non-innovator multiple source” (NIMS) drug (often an older drug with competition from generics).

Since 2010, the rebate rate for a NIMS drug is 13% of the average manufacturer price during the rebate period. Innovator drugs face a significantly higher rebate, of at least 23.1%.

It’s up to each drug company to properly categorize their drugs in the rebate program, but if a company is caught mis-classifying a drug in order to pay a lower rebate, they could be in violation of the False Claims Act, which prohibits the submission of bogus invoices to the federal government.

This week, after a number of lawmakers called on the U.S. Attorney General’s office to investigate this possible Medicaid fraud, Andrew Slavitt, Acting Administrator for the Center for Medicare & Medicaid Services (CMS), confirmed to Sen. Ron Wyden (OR) that Mylan had indeed mis-classified EpiPen as a NIMS drug and had been paying rebates that were at least 10% smaller than what the company should have paid.

Given that Medicaid has purchased around $1 billion in EpiPens since 2011, this disparity could mean the government was shortchanged by hundreds of millions of dollars by Mylan. However, in his letter to Wyden, Slavitt said that his office had not yet determined how much the drug companied owed.

Today’s settlement has been confirmed by Mylan and disclosed in a filing with the Securities and Exchange Commission, but as of the time of publishing this story, neither the DOJ nor CMS were commenting on the deal.

“The settlement terms provide for resolution of all potential rebate liability claims by federal and state governments as to whether the product should have been classified as an innovator drug for CMS purposes and subject to a higher rebate formula,” reads the statement from Mylan. “In connection with the settlement, Mylan expects to enter into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services. Mylan will continue to work with the government to finalize the settlement.”

While Mylan’s settlement is substantial, today’s announcement has some critics calling foul.

Sen. Richard Blumenthal (CT) called the deal “a shadow of what it should be,” and accused it of “lacking real accountability for Mylan’s apparent lawbreaking.”

According to Blumenthal, who had been among the senators pushing for a proper DOJ investigation into this matter, Mylan has short-circuited any such probe or the fact-finding process that would have been involved.

“This settlement is blatantly inadequate, not only in dollar amount, but also Mylan’s avoiding admission of moral and legal responsibility,” said Blumenthal.

Sen. Wyden was not as critical of the settlement, calling it a “first step for taxpayers to get what they are owed from drug companies,” while noting that he remains “extremely concerned by the alarming trend of rising drug prices straining family budgets and taxpayers, and by how this was allowed to happen in the first place.”

In a statement, Sen. Chuck Grassley of Iowa said there are still questions remaining after this announcement.

“It’s unclear whether this settlement is fair or in proportion to the amount Mylan overcharged the taxpayers. It’s also unclear how much money is going back to the states,” said Grassley. “The Justice Department should make all of the details as transparent as possible, including when it opened the investigation into Mylan. This is public money, and the public’s business generally ought to be public.”

Grassley and others voiced concerns that Mylan is merely one of many drug companies who may be shortchanging U.S. taxpayers.

“This settlement shows a big problem with just one company and one product,” explains Grassley. “Are there others and is CMS doing enough to look out for the taxpayers?”

Likewise, Sen. Amy Klobuchar (MN) said the EpiPen issue “must be the tip of the iceberg. If other drugs are misclassified, and surely EpiPen isn’t the only one, the public deserves to know it, the taxpayers need to get their money back, and the process needs to be changed to stop this from happening again.”

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.