ore than 1,200 hospitals around the country want to know if they were overcharged by Mylan Pharmaceuticals for the EpiPen auto-injector.
In a letter sent earlier this week to the Department of Justice, an industry trade group called 340B Health cited a recent settlement in which Mylan agreed to pay $465 million to resolve accusations of shortchanging Medicaid by failing to pay the appropriate rebates.
These hospitals participate in a federal program known as 340B in which drug makers must offer discounts of up to 50 percent on all outpatient drugs to hospitals and clinics that serve indigent populations. And the program uses the same formulas that are used for Medicaid rebates to establish ceilings on prices that are charged by drug companies.
Consequently, the hospital trade group also wants the Justice Department to ensure that its members can share in any settlement. There is speculation over some of the terms of the settlement, since the Justice Department has never officially commented on the deal, although Mylan issued a statement last month and has maintained the details are being finalized.
Under the Medicaid Drug Rebate Program, companies must accurately report — and pay — a rebate on drugs paid for by the agency. In the EpiPen device, the actual medicine, which is epinephrine, is a generic. But the device that delivers the treatment is 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 we reported previously, the Centers for Medicare and Medicaid Services said Mylan overcharged Medicaid for EpiPen for years, even though the company had been told it should have provided bigger rebates. From 2011 to 2015, Medicaid paid $797 million on EpiPen, after rebates and dispensing fees. But an agency official said the federal and state health care program for the poor should have spent less.
“This misclassification of the EpiPen as generic instead of brand would have a similar impact on establishing the 340B ceiling price and would likely have resulted in overcharges to 340B safety net providers for which they should be made whole,” Maureen Testoni, senior vice president, and Jeff Davis, the legislative and policy counsel, of 340B Health wrote to the Justice Department.
The settlement has caused a stink, because a growing number of lawmakers believe that the deal may not sufficiently compensate Medicaid programs and, therefore, may fail to dissuade other drug companies from similarly misbehaving.
On Wednesday, West Virginia Attorney General Patrick Morrisey called the $465 million “woefully deficient” compared with the “fraud” perpetrated by the drug maker and urged the Department of Justice not to follow through with the deal. And last week, Senator Elizabeth Warren (D-Mass.) called the deal “shamefully weak,” because it failed to hold Mylan accountable and allowed the company to deny any wrongdoing.
Separately, three other senators — Richard Blumenthal (D-Conn.), Chuck Grassley (R-Iowa), and Amy Klobuchar (D-Minn.) — recently asked the Justice Department to investigate whether Mylan violated the False Claims Act by “knowingly” misclassifying EpiPen as a generic instead of a brand-name product.