Pharmaceutical company Mylan revealed on Friday that it has agreed to pay $465 million to settle claims that it has overbilled Medicaid by misclassifying its anti-allergy product EpiPen, which has also recently faced intense scrutiny after drastic price increases.
Mylan has faced criticisms from consumers and lawmakers alike by increasing the price of the life-saving device by about sixfold. The device is used to deliver the epinephrine drug that can counter the potentially deadly effects of allergic reaction.
In 2008, the price for a two-pack EpiPen only costs about $100, but it is now priced at over $600, making the device unaffordable for many families who need it. Some allergy sufferers turned to potentially dangerous DIY syringe methods as a result of the price increase.
The settlement with the U.S. Department of Justice followed claims from lawmakers and health officials that the company wrongly classified EpiPen as a generic product instead of a brand product, which allowed it to evade paying for steeper rebates to the Medicaid program.
Such rebates are required by law for patients of Medicaid, which is funded by both states and federal government, but there are differences in amounts among brand and generic drugs.
In a letter sent to lawmakers this week, Acting Administrator Andy Slavitt of the federal Centers for Medicare and Medicaid Services said that the generic classification of EpiPen allowed the pharmaceutical company to pay smaller rebates on EpiPen sales, underpaying the health program for the poor by millions of dollars over a period of five years.
Since it classified EpiPen as generic, Mylan only paid rebates of 13 percent, or about $163 million, when it should have been paying at least 23 percent rebate for EpiPen being a brand name drug.
The company, which moved to Netherlands last year for tax purposes but is still managed from Canonsburg, Pennsylvania, however, said that the terms of settlement do not mean it admitted wrongdoing on its part.
"The question in the underlying matter was whether EpiPen Auto-Injector was properly classified with the Centers for Medicaid and Medicare Services ('CMS') as a non-innovator drug under the applicable definition in the Medicaid Rebate statute and subject to the formula that is used to calculate rebates to Medicaid for such drugs," Mylan said in a statement.
Mylan CEO Heather Bresch said that entering into the settlement is the right course of action at the moment for Mylan and its stakeholders as well as the Medicaid program.