Editor's Corner: Fury over EpiPen pricing could fuel Medicaid rebate investigations

EpiPen box
headshot of Evan Sweeney

Mylan, as you may have already heard, is the pharmaceutical industry's newest punching bag.

The company has been taking a public beating for hiking prices for EpiPens--a first-line defense against anaphylaxis--more than 400 percent. One mother used the power of social media to rally other parents to pick up their virtual torches and pitchforks by signing a petition to Congress that has generated more than 143,000 letters featuring words like “atrocity,” “greed” and “murder.”

Some legislators, like Sen. Richard Blumenthal (D-Conn.), have written strongly worded letters to Mylan CEO Heather Bresch, demanding that Mylan take “immediate action to lower the price of EpiPens.” Others have called for Mylan to testify before Congress and publicly justify its price increase. On Wednesday, Bresch will do just that in a hearing held by House Committee on Oversight and Government Reform.

Even Jimmy Kimmel jumped on board, taking a dig at EpiPen’s price hike at the Emmy Awards on Sunday night.

But not even ridicule from a late-night show host is going to bring down the price of EpiPens. A red-in-the-face congressional leader won’t do much either. Something tells me Wednesday won’t be a particularly enjoyable afternoon for Bresch, but it probably won’t be very satisfying for the politicians on the other side--one analyst told Reuters that “Heather is very good at being able to give an answer without offering much information.”

This kind of drug pricing outrage is cyclical. It happened with when Valeant drastically raised its prices for two life-saving heart medications in 2015, just days after the company purchased the rights to the drugs, and then jacked up prices for 54 other medications by an average of 65.6 percent.  

Touring, and the now infamous, smirking Martin Shkreli, increased the price of a newly purchased HIV drug, Daraprim, by more than 5,000 percent. Even after relenting to a 50 percent decrease for hospitals (still a 2,500 percent increase from its original price), the list price of the drug remains at $750 a pill.

Those companies took their own share of abuse from legislators and patients, but to no avail, mostly because pharmaceutical companies are legally allowed to set their own prices. Yelling and screaming about it might bring some necessary attention, but it won’t stop price hikes from reoccurring.

In the case of EpiPen, however, there may be an alternative route. Earlier this month, three senators inquired about EpiPen’s classification as a generic drug under the Medicaid Drug Rebate Program. The misclassification led to an estimated $4.3 million in overpayments in Minnesota during 2015 alone.

This discovery prompted a subsequent letter to Department of Health and Human Services Inspector General Dan Levinson, signed by 15 U.S representatives, asking for a broader investigation into the Medicaid Drug Rebate Program. That kind of all-encompassing review could implicate other drug manufacturers, and plenty of states will be watching. Already, West Virginia Attorney General Patrick Morrisey announced Tuesday that his office is investigating whether Mylan overcharged the state’s Medicaid program, according to Reuters.

It certainly wouldn’t be the first time that a drug company fudged the numbers it provided CMS. And historically, those have led to high-dollar settlements:

  • In May, Pfizer agreed to pay $784 million to settle claims that its subsidiary, Wyeth, didn’t give Medicaid the same discounts it gave non-government purchasers for the heartburn medication Protonix. (The Department of Justice estimated the damage at $2 billion).
  • In 2012, GlaxoSmithKline agreed to pay $300 million to resolve allegations that it falsely reported drug prices for nearly a decade. The settlement was wrapped into a $3 billion payment in which the company pleaded guilty to several criminal fraud charges.
  • In 2008, Merck paid more than $650 million to settle claims that it failed to report its best prices to the Medicaid Drug Rebate Program, and that it offered deep discounts to hospitals that used certain drugs.
  • Last year, AstraZeneca and Celaphon paid more than $50 million to settle claims they underpaid Medicaid rebates.

The anger surrounding rising drug prices is becoming more and more palpable every day, and it should be. Public outcry and legislative pressure can chip away at a broken system. Unfortunately, that won’t change it overnight.

Instead, that anger could very well fuel more investigations into Medicaid rebates, the same way a stream finds the path of least resistance. With its EpiPen price increase, Mylan has drawn a big, red target on its back. And so will the next drug company that makes the same pricing decisions.

For the time being, drug companies aren’t facing any immediate repercussions for astronomical drug price increases, but don’t think government investigators and prosecutors won’t keep those price hikes in mind as they search for signs of overbilling and fraud.