For the third time this month, a US senator is harshly criticizing a deal that Mylan Pharmaceuticals reached with the US Department of Justice for shortchanging Medicaid over rebates for its EpiPen device, which sparked national outrage after a series of price hikes.
In an Oct. 21 letter, Elizabeth Warren (D-Mass.) complained to US Attorney General Loretta Lynch that the $465 million settlement “fails to hold Mylan accountable” and is “shockingly soft on this corporate wrongdoer,” because Mylan did not admit any wrongdoing, none of its executives were penalized, and the company can deduct the payment from its corporate taxes.
She also described the settlement as “shamefully weak” and argued the feds are sending the wrong message because the deal lacks “deterrent value.” The “limp response to Mylan’s deliberate fraud raises a serious question about exactly how you plan to police other companies if you approve settlements that show that crime does pay,” she concluded.
The settlement was issued amid controversy over charges that Mylan improperly classified its EpiPen allergy device in reports to the Medicaid Drug Rebate Program. Under this program, companies must accurately report — and pay — a rebate on drugs paid for by the agency. The medicine is a generic, although the device that delivers the treatment is actually a brand-name, patented product.
Mylan, however, had been reporting EpiPen as a generic product for nearly a decade. This is an important distinction, because classifications are used to determine the size of rebates that companies pay Medicaid. Rebates, which companies pay in exchange for having their products covered, are lower for generics — 13 percent versus 23 percent for a brand-name product.
As a result, from 2011 to 2015, Medicaid paid $797 million on EpiPen, after rebates and dispensing fees. But the Centers for Medicare and Medicaid Services said that Mylan overcharged the federal program for its EpiPen device for years, even though the company had been told repeatedly that it should have provided bigger rebates.
Warren also wrote in her letter that her staff estimates that, as a result of the miscalculation, Mylan apparently underpaid Medicaid rebates by an estimated $530 million — primarily due to the failure to pay the required inflation rebate. Under the rebate program, companies with brand-name products must pay an additional rebate if prices rise at a rate faster than inflation.
And so, Warren wants the Justice Department to hold a meeting by Oct. 28 to brief her staff on the thinking behind the settlement. The Justice Department, so far, has not independently released any of the details concerning the agreement, which Mylan disclosed on Oct. 7. The announcement provided little information beyond saying that the deal resolved all claims regarding rebates.
[UPDATE: A Justice Department spokeswoman declined to comment.]
Similarly, two other senators — Richard Blumenthal (D-Conn.) and Chuck Grassley (R-Iowa) — also wrote letters this month to Lynch to criticize the settlement and ask for further information about the Justice Department decision to accept the settlement terms and for failing to disclose additional details. “The people and the states need to be assured that the $465 million settlement will make them whole,” Grassley wrote in his Oct. 11 letter.
“This proposed agreement is a shadow of what it should be — lacking real accountability for Mylan’s apparent lawbreaking. It short-circuits an investigation and [the] fact-finding necessary to determine the scope of illegality, culpability of individuals, and proof of criminal wrongdoing. Simply, this agreement is blatantly inadequate,” Blumenthal wrote in his own letter on Oct. 14.
Meanwhile, there is “slight concern Mylan may have been too quick to announce” the deal, according to an investor note written last week by Sanford Bernstein analyst Ronny Gal, citing a report in Inside Health Policy that there is no executed settlement agreement. “This could be just keeping a stiff upper lip, but does not do much to make us feel this is a ‘done deal,’” he wrote.
A Mylan spokeswoman noted the Oct. 7 statement said that “Mylan will continue to work with the government to finalize the settlement.”