Report: CMS Knew About Misclassification of EpiPens Since 2009 But Did Nothing

Miffed senator seeks answers

The U.S. Department of Health and Human Services’ (HHS) internal watchdog, the Office of Inspector General, warned the Centers for Medicare and Medicaid Services (CMS) that Mylan’s EpiPen, an epinephrine autoinjector, was incorrectly classified as a generic drug as far back as 2009, according to Iowa Senator Chuck Grassley.

Grassley, Chairman of the Judiciary Committee, has announced that he is seeking records from the Office of Inspector General (OIG) regarding the identification in 2009 of EpiPen’s misclassification, which led to significant overcharging of taxpayers. The inspector general, Daniel Levinson, also was invited to testify at a Judiciary Committee hearing scheduled for November 30 on the EpiPen misclassification and on a potential settlement with the Justice Department for the overcharges. The OIG told Grassley’s staff that it had notified the CMS in 2009 that the EpiPen was misclassified under the Medicaid Drug Rebate Program, meaning taxpayers were overpaying for the product.

“The taxpayers deserve answers on what happened between 2009 and now,” Grassley said. “It appears the EpiPen was misclassified for years, and CMS was notified of the problem. If no one did anything about the misclassification, why not? This could mean hundreds of millions of dollars in taxpayer overpayments occurred without justification.”

Grassley said his staff communicated with the OIG regarding an inspector general report from July 2009 entitled “Accuracy of Drug Categorizations for Medicaid Rebates.” The report noted that eight drugs were misclassified. The drugs were unnamed in the report. OIG staff confirmed to Grassley’s staff that one of the eight items was the EpiPen and that the office reported the misclassification to the CMS in 2009.

The EpiPen is classified as a generic drug rather than a name-brand drug in the Medicaid Drug Rebate Program. A generic classification means that a lower rebate is paid to Medicaid. CMS has acknowledged that the EpiPen has been misclassified. Last month, Mylan announced a $465 million settlement with the Justice Department over the misclassification. However, the Justice Department has said only that there is no executed settlement. Earlier this month, West Virginia's attorney general sent a letter to the department urging it to reject the purported $465 million settlement, calling it “woefully deficient.”

Under some calculations, the amount of overpayments by the taxpayers could be significantly higher than $465 million, according to Grassley’s office. It is also unclear whether the reported settlement amount contains all potential damages to be assessed by the Justice Department, including potential actions under the False Claims Act, which could result in treble damages paid to taxpayers.

In response, a spokesman for the CMS reiterated that “on multiple occasions” the agency advised Mylan about the proper classification of drugs and “expressly advised” Mylan about the EpiPen misclassification.

Mylan has come under fire recently for hiking the price of the lifesaving allergy treatment to more than $600 for a package of two in less than a decade.

Sources: Office of Senator Chuck Grassley; November 8, 2016; and Reuters; November 9, 2016.