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EpiPen controversy has a new twist: paying lower rebates to state Medicaid programs
Heads were being scratched in the past few days after Mylan announced it would provide a generic version of its own branded EpiPen (epinephrine), following the outcry over its inflated price. Why would a valuable brand be undercut by its owner? How does a company “self-authorize” an authorized generic?
Now, yet another twist in the story signals new trouble for Mylan. According to a New York Times story (based on an earlier report from Poltico Pro, a paywalled subscription service for Washington insiders), Mylan has been classifying its product as a generic when settling price contracts with state Medicaid programs. Branded products incur a 23% rebate to Medicaid, generally speaking, and price increases above inflation can ratchet up that discount. Generics, on the other hand, pay a 13% discount only. Yet, while Mylan has invested heavily in promoting its EpiPen brand, and has imposed price increases wildly beyond the inflation rate, it has classified the drug as a generic for Medicaid pricing purposes.
The classification was not inherently illegal, apparently; EpiPen’s active ingredient, epinephrine, is in fact generic but Mylan has depended on its proprietary delivery mechanism to maintain market exclusivity. And there have been some rumblings from CMS that the definitions for branded and generic would be tightened, with requirements for waivers when a generic product has gone through the New Drug Application process that new molecular entities generally must follow. An unknown additional number of drugs may be currently enjoying this branded-as-a-generic loophole.
Medicaid represents a specialized distribution channel; in theory, only the providers taking care of Medicaid patients (and being reimbursed by state and federal dollars) see the lower prices within the program. Thus, if a reclassification of EpiPen is warranted, it will amount to money clawed back from Mylan only for the Medicaid-funded prescriptions, and not all EpiPen purchasers. Ditto with other branded drugs being classified as generics.
“It just seems like we opened up a powder keg here, potentially, if in fact this is not only with Mylan but is just par for the course,” Senator Amy Klobuchar (D-MN), one of the early critics of the EpiPen pricing this summer, told the Times. “The government has to go back and review all these drugs, and the practice has to stop.”