Mylan, the embattled maker of the EpiPen, has agreed to pay the U.S. Justice Department $465 million to settle allegations that it overbilled Medicaid for the auto-injector that delivers a life-saving allergy medication.
The settlement, announced by the British drugmaker on Friday, is yet another mark against the company after significant backlash over EpiPen pricing. Mylan, which was been accused by legislators and regulators of misclassifying the brand name EpiPen as a generic, says the settlement “will resolve questions raised about the classification” of the EpiPen under the program. As a brand name drug, Mylan would have been responsible for paying more into the Medicaid Drug Rebate program, in which manufacturers pay quarterly rebates to states in exchange for coverage.
Generic-drug makers pay a rebate of 13% of the average wholesale price of a drug instead of the 23.1% rebate required for branded drugs. Outraged legislators have accused Mylan of bilking the program.
They've also expressed concern that the misclassification may be affecting the 340B drug program that provides discounts to safety net hospitals, because the 340B ceiling price is linked to a drug's Medicaid rebate amount. Soon after the backlash over pricing, Mylan announced plans to offer a generic version of EpiPen for half the price of the brand drug, which is listed at $608. Concerns over classification came from the National Association of Medicaid Directors and other organizations shortly thereafter.
Mylan did not admit to any wrongdoing as part of the settlement. The company did say, however, that the EpiPen “has been classified with CMS as a non-innovator drug since before Mylan acquired the product in 2007 based on longstanding written guidance from the federal government.” The settlement resolves all potential rebate liability claims that may come from federal or state agencies over whether the drug should have been subject to a higher rebate formula for innovator drugs.
Mylan CEO Heather Bresch in a statement that the settlement is “another important step in Mylan's efforts to move forward and bring resolution” to concerns surrounding the EpiPen. In addition to plans to launch a generic, Mylan increased the value of its discount cards and expanded its patient-access program that provides free EpiPens to low-income families.
“Entering into this settlement is the right course of action at this time for the Company, its stakeholders and the Medicaid program,” Bresch said.
Mylan is working with HHS' Office of Inspector General to finalize a corporate integrity agreement, which for example, could involve hiring a compliance officer or developing written standards. The agreement, if successfully met, allows the drugmaker to continue participating in Medicaid, Medicare and other federal healthcare programs.
A Justice Department spokeswoman declined to comment further on the case and the Office of Inspector General wasn't immediately available for comment.
In an earlier statement, the CMS said it had provided guidance to the industry and Mylan on proper classification, "and has expressly advised Mylan that their classification of EpiPen for purposes of the Medicaid Drug Rebate program was incorrect," but said it wasn't in a position to comment on specific steps taken by the CMS or the feds to correct that.
The CMS said "it is the manufacturer's responsibility under the statute, regulation, and the rebate agreement to report accurate product and pricing data to the rebate program," or risk penalties and potential liability under the False Claims Act or other government actions or claims.
Mylan's shares jumped more than 9% in after-hours trading Friday.