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id Mylan Pharmaceuticals misclassify EpiPen to avoid paying higher Medicaid rebates?

That’s the contention made by two Democratic lawmakers who want to know if the company is complying with the Medicaid Drug Rebate Program and the extent to which the drug maker may owe the federal health care program for unpaid rebates.

“Since at least 1997, EpiPen may have been incorrectly designated by relevant pharmaceutical companies as a generic in the Medicaid program, despite being considered a brand-name drug by the Food and Drug Administration and Medicare,” Senator Ron Wyden (D-Ore.) and Representative Frank Pallone of New Jersey, wrote in a letter today to the US Department of Health and Human Services. “This would mean Mylan has been vastly underpaying rebates owed to Medicaid for the EpiPen for years.”

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Under the Medicaid Drug Rebate Program, companies are responsible for accurately reporting and paying a rebate on drugs paid for by Medicaid, they noted.

If EpiPen was classified incorrectly, Medicaid received a 13 percent rebate that pertains to generic drugs, instead of the 23.1 percent rebate to which the program is entitled for brand-name medicines. The difference in rebates can add up. Senator Amy Klobuchar (D-Minn.) believes misclassification will cost her state more than $4 million this year. “That’s just one state, over the course of one year, for one drug,” she said in a statement.

1997 letter from the Medicaid Drug Rebate program that was written to Dey Laboratories, which Mylan purchased in 2007, noted that it was “fitting and proper” to classify EpiPen as a “non-innovator,” or generic drug product. However, the lawmakers contend this is inconsistent with the way Medicare Part D views the product.

If EpiPen was classified incorrectly, Medicaid received a 13 percent rebate that pertains to generic drugs, instead of the 23.1 percent rebate to which the program is entitled for brand-name medicines. The difference in rebates can add up. Senator Amy Klobuchar (D-Minn.) believes misclassification will cost her state more than $4 million this year. “That’s just one state, over the course of one year, for one drug,” she said in a statement.

The news contributed to yet another stop in Mylan stock, which was down more than 4 percent today.

“While we note there is no proof Mylan did anything improper, there could be ramifications if Mylan purposefully (did anything) improperly, including fines, restrictions, and other penalties,” Wells Fargo analyst David Maris wrote in an investor note today.

A Mylan spokeswoman wrote us that the company has “complied with all laws and regulations regarding the Medicaid rebate classification of EpiPen,” which meets the correct definition in the Medicaid rebate law. The device was classified as non-innovator, or generic, since long before Mylan acquired the product and its classification is “consistent with longstanding written guidance from the federal government,” she said.

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“Just this year, the government adopted a new rule intended to clarify ambiguities in the Medicaid rebate law,” she added. “The rule establishes a new process for pharmaceutical companies to follow if they have products, like EpiPen … that they believe should continue to be treated as a [generic] drug.” Pursuant to a new rule, Mylan intends to file an application for non-innovator status by April.

The missive was just one of several aimed Friday at the beleaguered company over its EpiPen, a lifesaving product that combats severe allergic reactions. However, EpiPen is now at the center of the national firestorm over drug prices — Mylan continually raised the price by 548 percent over the past decade to $600.

The company also lobbied for legislation that makes it possible for the device to become a fixture in many schools and maintain near monopoly status — its market share is about 89 percent, according to IMS Health, the market research firm. But its tactics are undergoing tremendous scrutiny from a growing number of lawmakers.

Over just the past 24 hours, the New York City Comptroller accused the Mylan board of ‘weak oversight’ and demanded changes, and Congresswoman Tammy Duckworth asked the US Department of Justice to investigate possible antitrust violations regarding the sale of discounted EpiPens to schools. Meanwhile, Hillary Clinton cited EpiPen today in a proposal to combat steep prescription drug prices.

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  • Not that there wasn’t a logic problem with this: ” The device was classified as non-innovator, or generic, since long before Mylan acquired the product” What does this approach mean for the ‘new and improved generic version? Will two negatives make it an innovator product again?

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