Medicaid Overpaid $1.27 Billion For EpiPen, OIG Charges

EpiPen has been in the news ever since last year’s outcry over the discovery that its maker, Mylan, hiked the price 550% for the auto-injected emergency allergy treatment. The list price for an EpiPen two-pack is $609.

The device and its manufacturer made headlines again yesterday when an analysis by the HHS Office of Inspector General (OIG) showed that Medicaid might have been overbilled for EpiPen to the tune of $1.27 billion between 2006 and 2016.

That’s nearly three times the $465 million that the company agreed to pay the U.S. government last October as part of a settlement. Mylan was accused of categorizing EpiPen as a generic treatment, under the Medicaid Drug Rebate Program. State Medicaid programs are paid a rebate by pharmaceutical companies of 13% for sales of generics. For brand-name products, the pharmaceutical companies have to pay the states a minimum rebate of 23.1%. Mylan did not admit that it did anything wrong in the settlement.

In a two-page letter, the OIG underscored that it was not making a suggestion about what HHS should seek to recover from Mylan, because the OIG could not weigh all the factors—the suggestion being that Mylan may owe more than $1.27 billion.

For instance: “OIG did not perform an analysis of state supplemental rebates that are likely to impact Medicaid’s overall expenditure for EpiPen,” the OIG wrote.

Calculating the rebate for a brand-name drug is complex, with two different calculations. “The basic rebate amount for a brand-name drug is based on the greater of two figures: a fixed percentage (currently 23.1%) of the drugs AMP [average manufacturer price] or the difference between the drug’s AMP and Best Price,” the OIG wrote.

Pharmaceutical companies report AMPs and Best Prices to CMS.

“Mylan did not report Best Price information to CMS for Epipen,” the OIG reported. “Because Best Price was not available, we could perform only one of the two calculations for determining the basic rebate amount.”

The OIG’s analysis was also limited by the fact that it could not take into account how state supplemental rebates might affect calculations.

Republican Sen. Chuck Grassley released the OIG analysis. He is chairman of the Senate Judiciary Committee that launched a probe into Mylan’s pricing methods last year.

“Taxpayers have a right to know what happened here and to be repaid whatever they are owed,” Grassley said in a statement.

He criticized Mylan for overbilling the government, and also charged that the drug company refused to cooperate with the committee’s investigation.  

Source: Office of Inspector General