In October 2016 Mylan N.V. announced that its subsidiary, Mylan Inc., agreed to pay a $465 million settlement to the U.S. Department of Justice (DOJ) to resolve questions surrounding the classification of EpiPen Auto-Injector and EpiPen Jr Auto-Injector (EpiPen) for the Medicaid Drug Rebate Program.
The terms of the settlement provide no admission of wrongdoing on the part of Mylan Inc. its affiliates, or its personnel. The matter involved whether EpiPen was properly classified with the Centers for Medicaid and Medicare Services (CMS) as a non-innovator (generic) drug under the applicable definition in the Medicaid Drug Rebate Program statute and therefore subject to the formula used to calculate rebates to Medicaid for such drugs (a lesser rebate than for innovator drugs). Mylan contends that the EpiPen was classified with CMS as a non-innovator drug before Mylan ever acquired the product in 2007 based on longstanding guidance from the federal government. The government, however, contended that the drug should have been classified as an innovator drug.
The settlement terms provide for resolution of all potential rebate liability claims by federal and state governments as to whether the product should have been classified as an innovator drug for CMS purposes and subject to a higher rebate formula, Mylan also expects to enter into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services.
After the announced settlement, Senator Amy Klobuchar joined Senators Richard Blumenthal and Charles Grassley and called for the DOJ to investigate whether Mylan violated the law when it misclassified EpiPen in order to pay a lower rebate to the various states. Massachusetts Senator Elizabeth Warren also criticized the $465 million settlement. In a recent letter to Attorney General Loretta Lynch, the Democratic senator wrote that her staff calculated that Mylan underpaid Medicaid rebates by an amount that significantly exceeded the settlement.
In addition to concerns voiced by these Senators, at least one state Attorney General has called on the DOJ to reject the settlement intended to resolve the allegations that the company shortchanged the Medicaid system in rebates for sales of EpiPen. West Virginia’s AG Patrick Morrisey called the proposed settlement a “sweetheart deal” that is “not in the best interests of West Virginia” if the amount Mylan has said it will pay is correct. Morrisey further stated that such a settlement sends an improper message to other entities engaged in the Medicaid market. Other comments included showing great concern that the settlement was a windfall and that some estimates indicate that the value of the settlement should be revisited. Others have insinuated that the DOJ does not have the authority to settle states’ individual drug rebate claims against Mylan, which means any ‘global’ settlement with the states raises a variety of challenges.
Medicaid receives a 23% discount on brand-name drugs and a 13%discount on generic drugs. EpiPen had been classified as a generic drug since at least 1997, both by Mylan and previous makers of the emergency medicine, according to CMS. As a result, it is unclear why the federal government insists that EpiPen be a brand-name drug, thereby requiring Mylan to pay such a large additional amount. The DOJ hasn’t provided any comment on the settlement or the subsequent concerns expressed by other government officials. Details of the agreement may not be final while the two sides discuss details of an accord.
Ned Milenkovich is Co-Chair of the heathcare law practice at Much Shelist PC, and vice chair of the Illinois State Board of Pharmacy. Call him at 312-521-2482 or [email protected].
This article is not intended as legal advice and should not be used as such. When legal questions arise, pharmacists should consult with attorneys familiar with the relevant drug and pharmacy laws.