HHS: Mylan May Have Overcharged U.S. for EpiPen by $1.27 Billion

Amount is three times more than company agreed to repay

The Department of Health and Human Services Office of Inspector General (OIG) has estimated that taxpayers may have overpaid drug-maker Mylan N.V. for its EpiPen emergency allergy device by as much as $1.27 billion from 2006 through 2016––far more than the $465 million that the company had agreed to pay in settlement negotiations with the Obama administration’s Justice Department. The analysis was released by Senator Chuck Grassley (R-Iowa), chairman of the Senate Judiciary Committee.

In a letter to Josh Flynn-Brown, investigative counsel for the Judiciary Committee, the OIG explained that the classification of a drug is a key factor in determining the amount of rebates that a manufacturer owes under the Medicaid Drug Rebate Program (MDRP). Generally, manufacturers owe higher rebate amounts for brand-name drugs than for generic drugs. The basic rebate amount for a generic drug is based on a percentage (currently 13%) of its average manufacturer price (AMP). The basic rebate amount for a brand-name drug, on the other hand, is based on the greater of two figures: a fixed percentage (currently 23.1%) of the drug’s AMP or the difference between the drug’s AMP and best price. Whichever formula yields the higher value determines the brand-name drug’s basic rebate amount. Drug manufacturers report AMPs and, for brand-name drugs, best prices to the Centers for Medicare and Medicaid Services.

According to the OIG, Mylan has historically classified the EpiPen as a generic for purposes of the MDRP. Therefore, the rebates that Mylan paid for the EpiPen were based on a percentage of the AMP. In contrast, if Mylan had classified the EpiPen as a brand-name product, the company should have calculated its rebates based on the greater of a higher percentage of the AMP or the difference between the AMP and best price. In addition, if the EpiPen had been classified as a brand-name product, Mylan would have been required to pay inflation-related rebate amounts for the EpiPen if its price increased faster than the rate of inflation.

Based on these factors, the OIG determined the estimated rebate differential to be $1.27 billion for 2006 through 2016.

“Mylan and the Obama administration reportedly were close to settling the overpayment for much less than $1.27 billion,” Grassley said in a statement. “Taxpayers have a right to know what happened here and to be repaid whatever they are owed.”

Sources: HHS OIG; May 31, 2017; and Senator Chuck Grassley; May 31, 2017.