Global pharmaceuticals company Mylan has agreed to pay $465 million to settle EpiPen Medicaid claims against it over allegations that it overpriced its emergency allergy products.
The settlement with the Department of Justice was announced by the drug maker on Friday. It comes after American lawmakers and federal health officials complained that Mylan had classified its EpiPen as a generic product when in fact it is not.
The drug company had reportedly classified its emergency allergy injection as a generic product since 1997 under the Medicaid program for the poor. This enabled it pay lower amount in rebates on sales of the products. But the U.S. government says EpiPen was wrongly classified, stating that it is a brand product which should have paid higher rebates.
EpiPen is a pen-like device used to inject epinephrine in order to deal with emergency, severe allergic reactions.
The law requires pharmaceuticals companies to pay rebates on sales of their products to Medicaid-insured patients. Under the government’s pricing rules, generics attract payment of 13 percent in Medicaid rebates, while brand-name medications have rebates set at a minimum of 23 percent.
Recently, officials of the Centers for Medicare & Medicaid were questioned by the Congress on what was being done about the lower rebate being paid by Mylan. Some senators last week requested the Department of Justice to investigate the EpiPen classification. It is believed the interest shown in the matter by the law makers contributed to the settlement finally announced by the drug company late Friday.
“I am glad the Department of Justice pursued this so quickly, since the misclassification was an outrage,” Sen. Amy Klobuchar (D-Minn) said in a statement.
Public outcry about the EpiPen misclassification was fueled by anger over outrageous inflation in the price of the anti-allergy injection. Mylan, which acquired rights to the product in 2007, has raised price per pair from $94 in that year to $608 in 2016. The price hike has come without there being significant improvement to the product since the acquisition.
Perhaps, more infuriating to some people is the claim it does not cost up to $10 to produce a unit of EpiPen.
Members of the Congress have also shown interest in knowing why such a high price is being charged for EpiPen. Mylan Chief Executive Heather Bresch was invited to a hearing of the House Oversight and Government Reform Committee on September 21 to explain the outrageous hike.
It was later found out that the company earned considerably higher profit on each pair of EpiPen than the $100 claimed by Bresch.
Government health programs, such as Medicaid, are principal EpiPen buyers. The amount spent on the product by Medicare and Medicaid surged some 463 percent from $86.5 million in 2011 to $486.8 million last year, according to Fox News.
Settlements such as this one usually result after several years of negotiations. The fast pace with which this one was reached indicated Mylan wanted to quickly move on from the controversy, even though it claimed the deal did not involve admission of wrongdoing.
On Thursday, CMS revealed that Mylan has also not been paying Medicaid another rebate required when the price rise of a brand drug is higher than inflation. Average percentage increase in EpiPen price has been more than 10 times higher each year since 2007.