EpiPen Company Overcharges Government and Lawmakers Are Livid

Mylan CEO Heather Bresch testifies on Capitol Hill, Sept. 21, 2016 / AP
October 6, 2016

Members of Congress are furious after the Centers for Medicare and Medicaid Services, or CMS, confirmed that Mylan, the drug company that makes the EpiPen, has been overcharging the government for the allergy medication.

Sen. Ron Wyden (D., Ore.) and several other members of the the Senate Finance Committee signed a letter that was sent to the CMS Inspector General last month asking whether Mylan manipulated the Medicaid Drug Rebate Program by incorrectly categorizing the EpiPen as a generic drug, Business Insider reported.

Wyden and Rep. Frank Pallone (D., N.J.) issued a statement in reaction to the news that Mylan was overcharging the government.

"Today’s letter is more evidence that while Mylan irresponsibly raised the price of EpiPen, they were also bilking taxpayers out of millions of dollars," Wyden and Pallone said."Essential medicines like EpiPen are increasingly out of reach for families across the nation due to unjustified price hikes, and it’s high time for drug companies to take responsibility for their actions. We will ensure taxpayers get their due."

While CMS does not know the exact monetary value that was overcharged, they do know EpiPen should not have been classified as a multiple source, or generic, drug. CMS discussed this issue in a letter that they sent to the Senate, according to Business insider.

A review of our records indicates that, prior to 1997, EpiPen was reported as a single source, or brand drug, for the Medicaid Drug Rebate Program. Since the fourth quarter of 1997, EpiPen has been reported as a non-innovator multiple source, or generic drug. EpiPen is approved under a New Drug Application (NDA) by the Food and Drug Administration (FDA), has patent protection, and has no FDA-approved therapeutic equivalents.

These facts indicate EpiPen does not meet the definition of a multiple source drug, but, in fact, meets the definition of a single source drug or brand drug. The Center for Medicaid and CHIP Services in CMS has, on multiple occasions, provided guidance to the industry and Mylan on the proper classification of drugs and has expressly told Mylan that the product is incorrectly classified.

As a result of the incorrect classification, there were financial consequences that affected how much federal and state governments spent due to quarterly rebates that Mylan owes for EpiPen.

The reason why misclassification is a big deal is because brand-name drugs have inflation protections with Medicaid that generics don’t. Makers of brand-name drugs have to pay higher rebates to states than generics–23.1 percent versus 13 percent. Also, they have to pay additional rebates if their price increases rise more than inflation.

Due to misclassification and underpaying rebates, Mylan previously paid a $124 million fine in 2009 and will likely face more fines as the government increases its scrutiny of the company’s practices. According to Business Insider, the government increased spending on EpiPen by 463 percent between 2011 and 2015. The spending increased from $86 million to $487 million.

Mylan CEO Heather Bresch is the daughter of Sen. Joe Manchin (D., W.V.). Despite her father being a Democratic lawmaker, there is bipartisan criticism of her company’s actions.

In the House, Representatives Jason Chaffetz (R., Utah) and Elijah Cummings (D., Md.) are still demanding more information about how much Mylan actually makes off EpiPens, for one thing. They demanded more information from the company earlier this week.