Several U.S. senators, including Minnesota Democrat Amy Klobuchar, have asked the Justice Department to determine whether Mylan Pharmaceuticals broke the law in classifying its brand name EpiPen as a generic device in order to lower rebates the company paid to Medicaid.
“Pharmaceutical companies are responsible for determining whether their products are innovator [i.e. brand name] or [non-innovator multiple source, i.e. generic] drugs,” Klobuchar, Charles Grassley, R-Iowa, and Richard Blumenthal, D-Ct., wrote to Attorney General Loretta Lynch in a letter Wednesday. “Companies can reap huge profits, at the expense of the states and taxpayers, by misclassifying innovator drugs ... In the past, the Department has secured settlements against drug companies under the False Claims Act for such practices — including against Mylan Pharmaceuticals.”
EpiPens, which are epinephrine-filled injectors, treat severe, sometimes life-threatening allergic reactions. Many children carry them. While experts said epinephrine is cheap and the auto-injector system is not costly to produce, Mylan has raised the cost of a two-pack of EpiPens from $100 in 2008 to $500 to $600 in 2016.
The company is obliged to pay rebates back to state administrators of the federal Medicaid program, which provides health coverage for low-income Americans. Those rebates vary based on the classification of a drug.
In the case of innovator drugs, which are in essence brand names, the rebate amount is at least 23.1 percent of what the company received in Medicaid payments. In the case of non-innovator multiple source drugs, which are in essence generic, the rebate amount is 13 percent. That means a company can keep 10 percent more of its Medicaid payments if it classifies its drug as non-innovator or generic.
Klobuchar has charged that Mylan’s incorrect non-innovator classification of EpiPens allowed the company to underpay Minnesota Medicaid by $4.3 million in 2016.
The company has said it followed all federal regulations in obtaining non-innovator status and will do so again when the drug comes up for review by April 1, 2017.