My­lan to pay $465M over Med­i­caid EpiPen re­bates

Daily Local News (West Chester, PA) - - NEWS - By Linda A. John­son

Drug­maker My­lan will pay $465 mil­lion to set­tle al­le­ga­tions that it over­billed Med­i­caid for its life-sav­ing EpiPen, end­ing one of the con­tro­ver­sies over the soar­ing price of the emer­gency al­lergy in­jec­tion.

The set­tle­ment with the De­part­ment of Jus­tice fol­lows news that EpiPen has been in­cor­rectly clas­si­fied since late 1997 as a generic prod­uct un­der the Med­i­caid health pro­gram for the poor and dis­abled.

How­ever, the fed­eral govern­ment says EpiPen is a branded drug, mean­ing My­lan should have been pay­ing Med­i­caid a far higher re­bate un­der the govern­ment’s com­plex pric­ing rules. Drug­mak­ers are re­quired to pay Med­i­caid re­bates of just 13 per­cent for generic prod­ucts it pur­chases, ver­sus a 23.1 per­cent re­bate for brand-name drugs, which cost far more.

Mem­bers of Congress have re­cently grilled the Cen­ters for Medi­care & Med­i­caid about the dis­crep­ancy and whether it was tak­ing any ac­tion, at­ten­tion that ap­par­ently re­sulted in the set­tle­ment an­nounced late Fri­day.

“I am glad the De­part­ment of Jus­tice pur­sued this so quickly, since the mis­clas­si­fi­ca­tion was an ou­trage,” Sen. Amy Klobuchar, D-Minn., said in a state­ment. Klobuchar and sev­eral col­leagues had re­quested an in­ves­ti­ga­tion by the Jus­tice De­part­ment and other fed­eral agen­cies.

My­lan has be­come the lat­est poster child for phar­ma­ceu­ti­cal in­dus­try price­goug­ing, for hik­ing the price of a pair of EpiPens from $94 in 2007, when it ac­quired the prod­uct, to $608 this year, de­spite mak­ing no sub­stan­tive im­prove­ment to EpiPens over that stretch. Mean­while, an­a­lysts and oth­ers have es­ti­mated that it costs less than $10 to pro­duce one EpiPen.

Govern­ment health pro­grams, par­tic­u­larly Med­i­caid, are ma­jor pur­chasers of EpiPens. The amount Medi­care and Med­i­caid spent on EpiPens rose to $486.8 mil­lion in 2015 from $86.5 mil­lion in 2011, a jump of 463 per­cent.

While EpiPens have some com­pe­ti­tion, they’re so well known that they hold more than 90 per­cent of the mar­ket for ep­i­neph­rine au­toin­jec­tors, which are jabbed into the thigh to halt run­away al­ler­gic re­ac­tions to in­sect bites and stings and foods such as nuts and eggs.

Mul­ti­ple mem­bers of Congress have been in­ves­ti­gat­ing the ex­or­bi­tant price hikes, and My­lan CEO Heather Bresch was called on the car­pet for the price in­creases at a Sept. 21 hear­ing of the House Over­sight and Govern­ment Re­form Com­mit­tee. It was later dis­cov­ered that Bresch in­cor­rectly claimed her com­pany only made a $100 profit on a pair of EpiPens, when the real profit was sig­nif­i­cantly higher.

Be­sides pay­ing Med­i­caid a too-low re­bate on EpiPen pur­chases, CMS said Thurs­day that My­lan hasn’t been pay­ing Med­i­caid a sec­ond re­bate that’s re­quired when­ever the price of a brand­name drug price rises more than in­fla­tion. The price of an EpiPen pack rose 23 per­cent a year on av­er­age be­tween 2007 and 2016. In­fla­tion has av­er­aged less than 2 per­cent a year over the same pe­riod.

On Fri­day, My­lan said in a state­ment that the pro­posed set­tle­ment re­solves all po­ten­tial fed­eral and state govern­ment claims and doesn’t pro­vide a find­ing of wrong­do­ing on the part of the Eng­land-based com­pany.

“This agree­ment is an­other im­por­tant step in My­lan’s ef­forts to move for­ward and bring res­o­lu­tion to all EpiPen Auto-In­jec­tor re­lated mat­ters,” Bresch said in the state­ment.

My­lan, which has its op­er­a­tional head­quar­ters out­side Pitts­burgh, low­ered its 2016 guid­ance for ad­justed earn­ings per share by 15 cents, to a new range of $4.70 to $4.90 per share. That’s be­low the av­er­age an­a­lyst es­ti­mate of $4.95 per share com­piled by Fact­Set.

My­lan said the re­duced fore­cast is partly be­cause of the up­com­ing launch of generic EpiPens, which My­lan has said will cost about $300.

Shares of the com­pany jumped more than 10 per­cent in af­ter-hours trad­ing.

THE AS­SO­CI­ATED PRESS

My­lan CEO Heather Bresch holds up EpiPens while tes­ti­fy­ing Sept. 21 on Capi­tol Hill in Wash­ing­ton, be­fore the House Over­sight Com­mit­tee hear­ing on EpiPen price in­creases. On Fri­day, My­lan agreed to pay $465 mil­lion to set­tle Jus­tice De­part­ment al­le­ga­tions that it over­billed Med­i­caid for its life-sav­ing EpiPen al­lergy in­jec­tion.

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