Life Science Compliance Update

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May 03, 2017

Mylan Settlement Classified as “Too Low”

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Many of our readers may remember back in October 2016, when Mylan agreed to pay $465 million to settle claims related to the way EpiPen was classified under the Medicaid rebate program.

The settlement was based on allegations that the EpiPen was classified as a non-innovator drug with Centers for Medicare and Medicaid Services (CMS) when in reality, according to CMS, EpiPen is a branded drug and Mylan should have been paying Medicaid a much higher rebate under the government’s pricing rules. News that EpiPen has been incorrectly classified since late 1997 as a generic product was released just before this settlement.

CMS also alleged that other than paying Medicaid too-low of a rebate on EpiPen purchased, Mylan also was not paying a second rebate that is required whenever the price of a brand-name drug rises more than inflation. The price of an EpiPen pack rose an average of twenty-three percent per year between 2007 and 2016. Inflation, on the other hand, rose at an average of less than two percent per year over the same period.

This settlement (which has yet to be finalized), has been the most recent of Mylan’s woes. A study recently published in JAMA Internal Medicine concludes that Mylan underpaid in its Medicaid misclassification settlement with the United States government. Researchers at Harvard calculated publicly available data on acquisition costs for Mylan’s EpiPen and incorporating prescription volumes, plus branded and generic rebate rates under the federal healthcare program.

According to the study, at a bare minimum, Mylan avoided paying $426.1 million in rebates due to the misclassification of EpiPen as a non-innovator drug. The calculations that led to the settlement reach back only to 2012, when Mylan picked up EpiPen in 2007.

Writing in JAMA Internal Medicine, researchers Jing Luo, M.D., Aaron Kesselheim, M.D., J.D., and Jerry Avorn, M.D., point out that the settlement “underestimates the actual cost of Mylan’s strategy” to Medicaid, “pointing to the limits of litigation as a way of recovering taxpayer funds.” Instead, they believe, it shouldn’t be up to drug companies to classify their meds as a generic or a branded pharmaceutical.

Litigation expenses, additional rebate agreements and uncertainty surrounding the government’s responsibility could have also played a role in the settlement negotiations, said the authors, who are members of the Division of Pharmacoepidemiology and Pharmacoeconomics at Harvard Medical School.

Mylan did not comment on the study and did not provide an update of the settlement status, which has yet to be finalized, despite being announced more than five months ago. 

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