In the wake of the controversy over EpiPen pricing, a group of lawmakers is demanding a probe into the Medicaid Drug Rebate Program, which requires drug makers to pay rebates in exchange for having their products covered.
In a letter sent Tuesday to the Inspector General at the US Department of Health and Human Services, 15 House Republicans want to know the extent to which the Centers for Medicare and Medicaid Services is properly overseeing the program and how medicines are classified. The probe should include, “but not be limited to” EpiPen, Representative Fred Upton (R-Mich.) and the other lawmakers wrote.
Their interest was sparked by concerns that Mylan Pharmaceuticals, which sells the EpiPen emergency allergy device, may not have paid all of the rebates to which Medicaid is entitled. This is an issue for taxpayers because the states and the federal government use the rebates from drug makers to offset the cost of covering medicines.
The question emerged earlier this month amid confusion over whether Mylan correctly classified and reported EpiPen to Medicaid. The drug maker apparently reported EpiPen as a generic, instead of a brand-name, product. This is a significant distinction, because these classifications are used to determine the size of the rebate that companies pay Medicaid, and companies pay lower rebates for generics.
The drug maker has denied shortchanging Medicaid, but the situation remains unclear. A 1997 letter from the Medicaid Drug Rebate program that was written to Dey Laboratories, which Mylan purchased in 2007, noted it was “fitting and proper” to classify EpiPen as a generic product. But earlier this month, CMS indicated the product was not classified correctly.
As we noted previously, 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.
Other lawmakers, by the way, earlier this month wrote to HHS to complain that the generic classification for EpiPen is inconsistent with how the US Food and Drug Administration lists the device. And other lawmakers contend the generic classification is inconsistent with the way that CMS views the product for the Medicare Part D prescription drug program. For its part, CMS has said it is conducting a review.
To what extent the EpiPen episode is an isolated incident is uncertain, but the lawmakers are not the only ones who are concerned that other companies owe rebates to Medicaid.
“Are there similar situations? I would have to say I don’t know, but there is concern that the problem is bigger than EpiPen,” said Matt Salo, executive director of the National Association of Medicaid Directors. “There’s nothing more opaque than pharmaceutical pricing and this is a very frustrating situation. Is it classified correctly or not? So shedding some sunlight on this is a good thing.”
The outcome will be closely watched because the rumpus raises what attorneys at the Foley & Lardner law firm wrote in a blog post as a “novel and important legal question.” That’s because epinephrine, the active ingredient in EpiPen, is a generic, but the actual device is considered a patented, brand-name product. Such conundrums could easily extend to asthma inhalers and insulin injectors.
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