Mylan has agreed to pay $465 million to resolve allegations that it knowingly misclassified its branded EpiPen as a generic drug to avoid paying rebates owed to Medicaid, the U.S. Attorney’s Office in Boston has announced.
Mylan Inc. and Mylan Specialty L.P., which signed the agreement to settle alleged violations of the federal False Claims Act, are wholly owned subsidiaries of Mylan N.V.
Brand name drugs are subject to a higher Medicaid rebate that includes any difference between the drug’s current price and the price the drug would have had if its price had increased only at the general rate of inflation. In contrast, generic drugs originating from multiple manufacturers are subject to lower rebates that, at least until recently, did not include an inflationary component.
The government contends that Mylan improperly avoided paying state Medicaid programs the higher rebates for branded drugs by misclassifying the EpiPen as a generic drug, even though the EpiPen had no FDA-approved therapeutic equivalents and even though Mylan marketed and priced the EpiPen as a brand name drug. Mylan raised the price of EpiPen by approximately 400% between 2010 and 2016.
As part of this settlement, Mylan has entered into a corporate integrity agreement (CIA) with the Department of Health and Human Services (HHS) Office of Inspector General that requires, among other things, an independent review organization to annually review multiple aspects of Mylan’s practices relating to the Medicaid drug rebate program.
“Our five-year corporate integrity agreement requires intensive outside scrutiny to assess whether Mylan is complying with the rules of the Medicaid Drug Rebate Program,” said Gregory E. Demske, Chief Counsel to the HHS Inspector General. “In addition, the CIA requires individual accountability by Mylan board members and executives.”
In a statement, Mylan noted that the EpiPen had been classified with the Centers for Medicare and Medicaid Services “as a noninnovator drug since before Mylan acquired the product in 2007 based on longstanding written guidance from the federal government.”
Mylan said the settlement provides for resolution of all potential Medicaid rebate liability claims by the federal government, as well as potential claims by certain hospitals and other covered entities that participate in the 340B Drug Pricing Program. The settlement allocates money to the Medicaid programs of all 50 states and establishes a framework for resolving all potential state Medicaid rebate liability claims within 60 days.
The settlement does not contain an admission or finding of wrongdoing, Mylan said. The company said it will reclassify the EpiPen Auto-Injector for purposes of the Medicaid Drug Rebate Program and pay the rebate applicable to innovator products effective as of April 1, 2017.
Sanofi raised this matter with the U.S. Attorney’s Office in 2014. At the time, Sanofi was selling another epinephrine auto-injector drug called AUVI-Q and was reporting it to the Medicaid Drug Rebate Program as a brand name drug. In 2016, Sanofi filed a complaint against Mylan under the qui tam provisions of the False Claims Act, which permits private parties to sue on behalf of the government and to receive a share of any recovery. As a result of the settlement, Sanofi will receive $38.7 million as its share of the federal recovery, plus a share of the states’ recovery.