CMS: Mylan’s EpiPen misclassification harms state, federal budgets

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Mylan’s misclassification of EpiPens under the Medicaid Drug Rebate Program has significant financial consequences on state and federal budgets, according to a top Obama administration health official. 

From 2011 to 2015, Medicaid and Medicare Part D expenditures on EpiPens rose from $86 million to more than $487 million, a 463 percent increase, Centers for Medicare & Medicaid Services Acting Administrator Andy Slavitt wrote in a letter to Sen. Ron Wyden (D-Ore.). 

Mylan has paid much smaller rebates to that it would owe than if EpiPens had been correctly classified, Slavitt writes. Under the Medicaid Drug Rebate Program, brand-name drugs pay rebates of 23.1 percent of average manufacturer price (AMP) and generic drugs pay rebates of just 13 percent of AMP,  Slavitt notes.

Medicaid and Medicare Part D spent more than $1.2 billion on Mylan’s EpiPens from 2011 to 2015, the letter adds. Still, Slavitt says CMS cannot presently comment on the total amount of rebates Mylan owes due to the misclassification.

Last week, Sens. Richard Blumenthal (D-Conn.), Chuck Grassley (R-Iowa) and Amy Klobuchar (D-Minn.) asked Attorney General Loretta Lynch and the Justice Department to investigate the nature of Mylan’s misclassification of EpiPens within the Medicaid Drug Rebate Program.

Slavitt’s letter says CMS “has expressly told Mylan that the product is incorrectly classified.” Since Q4 in 1997, EpiPens have been classified as a non-innovator, multiple-source generic drug, according to the letter. But due to the fact that Mylan’s EpiPens are patent-protected and lacks a comparable FDA-approved therapeutic equivalent, it meets the definition of a single-source or brand-name drug, not a multiple-source drug, Slavitt notes.

A recent Kaiser Family Foundation study showed that between 2007 and 2014, Medicare Part D spending on EpiPens grew 1,151 percent even though the number of beneficiaries using the treatment increased just 164 percent.

Klobuchar previously estimated the misclassification spurred some $4.3 million in overpayments last year, adding “that’s just one state, over the course of one year, for one drug.”

In addition, anger over the high cost of EpiPens could very well fuel more investigations into Medicaid rebates--and Mylan specifically--on the part of federal investigators and prosecutors.