EpiPen maker Mylan might have thought that dealing with the public shaming of a congressional hearing would be the low point of its ongoing price-hike scandal, but lawmakers continue to scrutinize the drug company and are now calling for a federal investigation into the possibility that Mylan was deliberately mis-categorizing the emergency allergy medication in order to reap bigger payments from Medicaid.
In a letter [PDF] sent this morning to U.S. Attorney General Loretta Lynch by Senators Richard Blumenthal (CT), Chuck Grassley (IA), and Amy Klobuchar (MN), the lawmakers question the way that EpiPen was categorized under the Medicaid Drug Rebate Program.
That program requires drugmakers to pay a portion of their revenues — in the form of rebates — to the states. The size of those rebates is determined by whether the drug is considered an “innovator” medication (often a newer, higher-cost drug with little or no competition) or a “non-innovator multiple source” (NIMS) drug (often an older drug with competition from generics).
More precisely, the Social Security Act defines a NIMS drug as a covered medication for which there is “at least 1 other drug product which is rated as therapeutically equivalent… and is sold or marketed in the United States during the period.”
The difference between a NIMS drug and an innovator drug could have a big impact on a company’s bottom line. A drugmaker only pays a rebate worth 13% of the price for a NIMS drug, but innovator medications have rebate rates that start at 23.1%.
Drug companies are on a sort of honor code to categorize each of their drugs accordingly, and they can face significant penalties for labeling a drug as NIMS just to pay the lower rebate.
In fact, back in 2009 Mylan was one of four drugmakers that paid a penalty to the DOJ totaling $124 million for allegedly trying to game the rebate program.
Mylan has classified EpiPen as a NIMS medication since it acquired the drug, along with the rest of Merck’s generics business, nearly a decade ago. And it appears that this classification of the emergency allergy treatment goes back to at least 1997, when the Department of Health and Human Services concluded that EpiPen — at the time — qualified as a multiple-source drug.
“However, the EpiPen marketed by Mylan is significantly different than the 1997 version,” write the senators, pointing to new patents that have protected EpiPen from competition, along with other changes to the product. “Further, it is our understanding that classifying the EpiPen as a non-innovator product is inconsistent with industry practice. When Mylan’s competitors market a drug delivery product under a new drug application, at least some of them classify the product as an innovator, even if the drug being delivered is off-patent.”
The letter argues that EpiPen, which controls nearly all of the U.S. market for epinephrine auto-injectors, currently has no FDA-approved therapeutic equivalent and Mylan may be smaller rebates than the law requires. Deliberately misleading the government into the lower rebate rate could be a violation of the False Claims Act, notes the letter, which asks the DOJ to investigate accordingly.
“The American people have been rightly outraged as Mylan engaged in substantial price increases that resulted in billions of dollars paid by U.S. consumers,” concludes the letter. “They deserve to know whether the company also violated the False Claims Act and diverted millions of dollars from U.S. taxpayers.”
Earlier this month, Inside Health Policy reported that the Center for Medicare & Medicaid Services (CMS) had notified Mylan that the EpiPen was indeed incorrectly categorized as NIMS.
West Virginia’s attorney general recently revealed that he is already investigating Mylan’s possible deliberate misclassification of EpiPen, along with concerns that the company may have violated antitrust laws by making a deal with Teva Pharmaceuticals to keep an EpiPen competitor off the market while the sticker price of the drug soared by around 600%.
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