n a move that angered a key Senate lawmaker, Mylan Pharmaceuticals has declined to testify at a planned Nov. 30 Senate hearing to review a $465 million settlement the drug maker purportedly reached with the US Department of Justice for shortchanging Medicaid.
In a letter to Senator Chuck Grassley (R-Iowa), who chairs the Senate Judiciary Committee, an attorney for Mylan explained the company will not appear for three reasons — the “stated focus of the hearing,” because the hearing involves a “pending matter,” because both the Justice Department and the Centers for Medicare & Medicaid Services have already said they will not send officials to testify. The letter was signed by Kathryn Ruemmler, who previously worked as President Obama’s chief lawyer and is now at the Latham & Watkins law firm.
Grassley responded by blasting the feds, as well as the drug maker.
“The Obama Administration is dodging accountability for an expensive problem, and now a company is following its bad example,” he said in a statement. “Taxpayers have paid and [reportedly] continue to pay hundreds of millions of dollars more for the EpiPen than they have to pay. This happened because either the agencies in charge dropped the ball, the company gamed the system, or both.”
“Ironically, the company was eager to talk about this problem a few weeks ago in a press release to investors but not before the United States Senate. It’s a shame government agencies and the company are ducking accountability under a voluntary process. One way or another, I intend to get answers for patients and taxpayers.”
We asked the Senate Judiciary Committee if the hearing will be canceled, and a spokeswoman wrote us that Grassley “might reschedule the hearing. The committee has subpoena authority for witnesses. That authority is used pretty rarely but it’s an option.”
Grassley called the hearing after CMS reported that Mylan overcharged Medicaid for EpiPen for years, even though the company had been told it should have provided bigger rebates. The disclosure came amid national outrage over repeated price hikes Mylan imposed on its allergy emergency device and questions about the rebates the drug maker paid to Medicaid.
Ever since CMS officials acknowledged that Mylan had received repeated warnings about classifying EpiPen in the Medicaid program, lawmakers have questioned the extent to which the agency properly oversaw Medicaid rebates. And some federal and state lawmakers have also criticized the deal with the Justice Department, which Mylan announced several weeks ago.
As we reported previously, from 2011 to 2015, Medicaid paid $797 million for EpiPen, after rebates. But CMS said the federal and state health care program for the poor should have spent less because Mylan failed to pay the appropriate rebates. Mylan should have paid a 23 percent rebate, but paid a 13 percent rebate because it improperly misclassified Epipen as a generic and not a brand-name product.
This is a taxpayer issue, because states and the federal government use the rebates from drug makers to offset the cost of covering medicines. Under the Medicaid Drug Rebate Program, companies must accurately report — and pay — a rebate on drugs paid for by the agency. Classifications are used to determine the size of rebates that companies pay Medicaid, and rebates are lower for generic products.
Two months ago, Grassley and two other senators — Richard Blumenthal (D-Conn.) and Amy Klobuchar (D-Minn.) — asked Justice Department to investigate whether Mylan violated the law with its Medicaid classification. In a Sept. 28 letter to US Attorney General Loretta Lynch, they suggested the company “may have knowingly misclassified EpiPens.”
Separately, Grassley also asked the Securities and Exchange Commission chair Mary Jo White whether the agency is looking into whether Mylan misled investors in announcing a settlement on Oct. 7. “If Mylan’s purpose of the press release was to increase stock prices at the risk of misleading investors, it is exactly this set of facts and circumstances that the SEC should monitor,” Grassley wrote. “Companies cannot be allowed to manipulate the markets and investors via press releases.”
For its part, the Justice Department has only said it has not “agreed to any settlement” and has not confirmed any of the terms that Mylan publicized. “This seems to contradict Mylan’s claim that all potential liability claims have been resolved. Mylan made no mention of the fact that they are under an SEC investigation in their press release,” Grassley wrote, adding that Mylan should explain “why it released such a strongly worded press release knowing that a finalized settlement did not yet exist and given the apparent SEC investigation.”
As we have noted previously, the drug maker has said the settlement is being finalized.
The $465 million settlement, which was less than Wall Street expected, has angered other lawmakers, as well. Earlier this month, West Virginia Attorney General Patrick Morrisey vowed to reject the deal and called it “woefully deficient” in a letter to US Attorney General Loretta Lynch “compared with the fraud” perpetrated by Mylan.
Similarly, 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. She also complained the settlement lacks “deterrent value.”