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Observers are critical of the $465-million penalty as too lenient
There’s a certain messy, “drain the swamp” vibe around the entire settlement process between Mylan and the US government over the resolution of Mylan’s misclassification of its EpiPen product, which was approved as a branded product but sold by Mylan for years as a generic. Under Medicaid rules, both types of pharma products are discounted when sold into Medicaid programs, but the branded discount (23.1%) is higher. Because Mylan had classified the product as a generic, it overcharged state and federal Medicaid programs to the tune of $1.27 billion during 2006-2016, according to an OIG report.
Nevertheless, in a final settlement announced on Aug. 17, Mylan will pay a penalty of $465 million, the figure agreed to on a preliminary basis last October. “This settlement demonstrates the Department of Justice’s unwavering commitment to hold pharmaceutical companies accountable for schemes to overbill Medicaid,” said Acting Assistant Attorney General Chad Readler of the DoJ’s Civil Division.
“Mylan has always been committed to providing patients in the U.S. and around the world with access to medicine, and we look forward to continuing to deliver on this mission," said Heather Bresch, Mylan CEO, in a statement released after the settlement. There is no admission of guilt in the settlement, and EpiPen is now being treated as a branded product for Medicaid discounting. Mylan will also operate under a five-year corporate integrity agreement with DoJ.
But Senator Charles Grassley (R-IA), a legislator who keeps a constant eye on pharma industry practices, criticized the settlement in a statement his office released: “It looks like the settlement amount shortchanges the taxpayers . . . [DoJ] doesn’t say how it arrived at $465 million for a similar time period. Did the Justice Department consider the inspector general estimate? If not, why not?”
Another detail not generally acknowledged when the initial settlement was reached last year is that it came about through a qui tam whistleblower claim by Sanofi, makers of a different epinephrine injector, the Auvi-Q. Sanofi will garner $38.7 million from the settlement under False Claims Act rules. “We commend Sanofi for bringing this matter to our attention,” noted the DoJ statement. Apparently, it had been known at CMS for years what Mylan was doing, but no action was taken until the Sanofi suit was filed in 2014.
Mylan’s EpiPen stirred up a hornet’s nest of controversy last year, when consumers buying the product (which is an emergency treatment for allergic shock) found that the product was now priced at $600 per prescription. Congressional hearings revealed that Mylan had raised the product’s price by some 550% since it acquired it in the mid-2000’s—this for a product that has changed very little over the years. Bresch contended, among other things, that the price increases are due in part to pressure from pharmacy benefit managers who demand (and retain) a larger rebate each year from the drug. That claim (which has been aggressively disputed) started a focus on PBM marketing practices that continues to this day. In turn, Mylan began to market an authorized generic version of its own product, at a significantly lower price. Press reports indicate that Mylan has lost significant market share (from 95% to around 70%) for both types of EpiPen products; the company missed analyst estimates of profitability in the latest quarter, and its stock is down by almost a third from year-ago levels, in a period where most generic manufacturers are seeing similar downturns.