Mylan Pharmaceuticals on Friday said it has agreed to pay $465 million to settle claims it short-changed taxpayers by classifying its popular EpiPen as a generic instead of a brand-name product — a move that allowed it to pay smaller rebates to states under Medicaid.
The company did not admit any wrongdoing in the settlement with the Justice Department, which comes just days after the Centers for Medicare and Medicaid Services said the company had misclassified the life-saving device under the government insurance program for the poor.
“This agreement is another important step in Mylan’s efforts to move forward and bring resolution to all EpiPen Auto-Injector related matters,” said Mylan CEO Heather Bresch, the daughter of Sen. Joe Manchin, West Virginia Democrat.
The settlement is an outgrowth of Congress’ probe into the soaring cost of an EpiPen dual-pack, which now costs more than $600, compared to about $100 in 2009.
Mylan acquired the EpiPen from Merck in 2007, though gradual price increases over the last decade hadn’t caused a firestorm until recent weeks, as Congress grows impatient with headline-grabbing spikes in prescription drug costs.
Allergy sufferers typically stock multiple packs of the EpiPens to stave off anaphylactic shock, and Mylan had pushed to make sure schools had them handy.
Mrs. Bresch defended her company before House investigators last month, saying it raised prices to invest in improving the epinephrine injectors and make them more widely available, though admitted she should have predicted a backlash among those who must pay the full list price.
She said help is available for poor patients and those with skimpy health coverage, and pointed to the company’s decision to offer its own generic at half-price.
Yet lawmakers said the price hikes were harmful to public health and stretching public budgets. Amid the furor, members of Congress pressed CMS to find out if states had been overcharged due to a misclassification of the EpiPen under Medicaid.
Manufacturers pay states a 23.1-percent rebate on brand-name drugs compared to 13 percent for generics, so the label might have been forcing states to overpay, lawmakers said.
In response, acting CMS Administrator Andy Slavitt said the agency “has, on multiple occasions, provided guidance to the industry and Mylan on the proper classification of drugs and has expressly told Mylan that the product is incorrectly classified.”
“This incorrect classification has financial consequences for the amount that federal and state governments spend because it reduces the amount of quarterly rebates Mylan owes for EpiPen,” Mr. Slavitt wrote to Sen. Ron Wyden, Oregon Democrat, on Wednesday.
Mylan will book a $465 million charge for the quarter ending Sept. 30, so it cut its earnings forecast to $4.70 to $4.90 per share — down from the $4.85 - $5.15 it previously reported.
• Tom Howell Jr. can be reached at thowell@washingtontimes.com.
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