That classification allowed the company to pay less in rebates to state Medicaid programs — but it is unclear exactly by how much.
Mylan is currently paying Medicaid a 13 percent rebate, the rate for generic drugs. Mylan should be paying a 23 percent rebate, the rate for brand-name drugs, CMS said Wednesday. Classifying EpiPen — an allergy auto-injector that is used to treat severe allergic reactions — as a generic also allowed Mylan to avoid paying an inflation rebate that is required by law when drug companies raise the price of brand-name drugs above the rate of inflation.
Originally catching the attention of lawmakers, Mylan has raised the list price of EpiPen from less than $100 for a two-pack in 2007 to more than $600 today.
On Wednesday, Grassley and Sens. Amy Klobuchar (D-Minn.) and Richard Blumenthal (D-Conn.) sent a letter to the Department of Justice, asking it to investigate Mylan for potentially defrauding the government by misclassifying EpiPen.
Later that day, CMS confirmed Mylan did in fact misclassify the drug, and that CMS repeatedly told Mylan that EpiPen should have been named a brand-name drug instead of a generic.
“CMS has, on multiple occasions…expressly advised Mylan that their classification of EpiPen for purposes of the Medicaid Drug Rebate program was incorrect,” a CMS spokesman said. “This incorrect classification has financial consequences for the amount that federal and state governments spend by reducing the amount of quarterly rebates Mylan owes for EpiPen.”
Reacting to CMS’s statement, Blumenthal said Thursday that Mylan’s misclassification of EpiPen shows “criminal intent.”
“Repeated warnings from [CMS] about Mylan misclassifying the EpiPen is powerful evidence of criminal intent — showing that Mylan falsely called its drug a generic to reap huge profits at taxpayer expense,” Blumenthal said. “The Department of Justice should conduct a swift and thorough investigation, and take appropriate action.”
CMS did not comment on steps it is taking to correct the misclassification.
A Mylan spokeswoman said EpiPen has been classified as a generic drug since before the company acquired the product, and that the classification is consistent with government guidance.
In Minnesota, the misclassification will cost the state $4.3 million in 2016 alone, according to Klobuchar’s office, which requested the estimated figure from the Minnesota Department of Human Services. Klobuchar is demanding to know how much the misclassification of EpiPen, and potentially other drugs, is costing taxpayers nationally.
“This is a huge chunk of taxpayer money that appears to have unjustly gone to one company,” Klobuchar said. “That’s just one state in one year for one drug. We need to clear answers on how deep this misclassification goes, how much it has cost taxpayers across the country, and how many other drugs may be misclassified.”
On Sept. 20, the Attorney General’s Office of West Virginia, Mylan’s home state, announced it opened an investigation into whether Mylan defrauded the state’s Medicaid program.
Mylan chief executive Heather Bresch is the daughter of West Virginia Democratic Sen. Joe Manchin. Bresch was grilled by angry lawmakers earlier this month when she testified before the House Committee on Oversight and Government Reform on Sept. 21.