CONFIRMED: The maker of EpiPen overcharged the government, and lawmakers are furious

Before you go, we thought you'd like these...
Before you go close icon

The Centers for Medicare & Medicaid Services (CMS) confirmed to lawmakers that Mylan, the drug company that makes EpiPen, has been overcharging the government for the life-saving allergy medication.

And naturally, lawmakers are furious about it. Here's a statement from Senator Ron Wyden (D-OR):

"Today's letter is more evidence that while Mylan irresponsibly raised the price of EpiPen, they were also bilking taxpayers out of millions of dollars," Wyden and Pallone said."Essential medicines like EpiPen are increasingly out of reach for families across the nation due to unjustified price hikes, and it's high time for drug companies to take responsibility for their actions. We will ensure taxpayers get their due."

Wyden signed a letter that a number of members of the Senate Finance Committee sent to the CMS Inspector General last month. What the senators wanted to know was whether or not Mylan manipulated the Medicaid Drug Rebate Program (MDRP) by classifying EpiPen as a generic drug when it is in fact not.

The short answer from CMS that we have now is: Yes, but they're not sure by how much yet. Here's part of the letter the agency sent to the Senate [emphasis ours].

A review of our records indicates that, prior to 1997, EpiPen was reported as a single source, or brand drug, for the Medicaid Drug Rebate Program. Since the fourth quarter of 1997, EpiPen has been reported as a non-innovator multiple source, or generic drug. EpiPen is approved under a New Drug Application (NDA) by the Food and Drug Administration (FDA), has patent protection, and has no FDA-approved therapeutic equivalents.

These facts indicate EpiPen does not meet the definition of a multiple source drug, but, in fact, meets the definition of a single source drug or brand drug. The Center for Medicaid and CHIP Services in CMS 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.

The reason why misclassification is a big deal is because brand-name drugs have inflation protections with Medicaid that generics don't. Brand-name drugs have to pay higher rebates to states than generics — 23.1% versus 13%. Also, brand-name drugs have to pay additional rebates if their price increases rise more than inflation.

So by being classified as a generic Mylan saved itself a bunch of money. Back in 2009, Mylan paid a $124 million fine for misclassifying its drugs and under-paying rebates this way. It is the responsibility of the manufacturer to maintain accurate information of its drug's status.

Not done

From 2011 to 2015, government spending on EpiPen increased 463%, from $86 million to $487 million, according to CMS. This table was included in their letter.

medicare medicaid spend on epipenReuters

Now it looks like the government may want a chunk of that back.

Mylan came under fire in August when it increased the price of a pack of two EpiPens to $608. The pack cost around $100 when Mylan bought the drug back in 2007. The company's CEO, Heather Bresch, was on Capitol Hill answering for this last month, but so far lawmakers have in no way been mollified.

In the House, Representatives Jason Chaffetz (R-UT) and Elijah Cummings (D-MD) are still demanding more information about how much Mylan actually makes off EpiPens, for one thing. They demanded more information from the company earlier this week.

So just add this to a list of huge problems for the company.

See images of the life-saving medication:

8 PHOTOS
EpiPen
See Gallery
EpiPen
FILE PHOTO -- EpiPen auto-injection epinephrine pens manufactured by Mylan NV pharmaceutical company for use by severe allergy sufferers are seen in Washington, U.S. August 24, 2016. REUTERS/Jim Bourg/File Photo
EpiPen auto-injection epinephrine pens manufactured by Mylan NV pharmaceutical company for use by severe allergy sufferers are seen in Washington, U.S. August 24, 2016. REUTERS/Jim Bourg
Boxes of Mylan NV's EpiPen 2-Pak allergy shots sit on display for a photograph at a pharmacy in Princeton, Illinois, U.S., on Friday, Aug. 26, 2016. In response to intense criticism over the past few days, Mylan NV moved Thursday to expand assistance programs that help patients with high out-of-pocket expenses -- but didn't go as far as cutting the treatment's list price. Health insurers and U.S. lawmakers criticized the effort as an attempt to cover a 400 percent price hike that won't make the drug more affordable. Photographer: Daniel Acker/Bloomberg via Getty Images
Mylan NV's logo is displayed on a box of EpiPen 2-Pak allergy shots at a pharmacy in Princeton, Illinois, U.S., on Friday, Aug. 26, 2016. In response to intense criticism over the past few days, Mylan NV moved Thursday to expand assistance programs that help patients with high out-of-pocket expenses -- but didn't go as far as cutting the treatment's list price. Health insurers and U.S. lawmakers criticized the effort as an attempt to cover a 400 percent price hike that won't make the drug more affordable. Photographer: Daniel Acker/Bloomberg via Getty Images
Mylan NV's EpiPen allergy shots sit on display for a photograph in Princeton, Illinois, U.S., on Friday, Aug. 26, 2016. In response to intense criticism over the past few days, Mylan NV moved Thursday to expand assistance programs that help patients with high out-of-pocket expenses -- but didn't go as far as cutting the treatment's list price. Health insurers and U.S. lawmakers criticized the effort as an attempt to cover a 400 percent price hike that won't make the drug more affordable. Photographer: Daniel Acker/Bloomberg via Getty Images
This August 24, 2016 photo taken in Hudson, Wisconsin shows a youngster holding Epipens, that he uses to counteract allergic reactions. A five-fold price hike for EpiPen, which allergy sufferers use to counteract life-threatening reactions, has made Mylan the newest drugmaker to come under attack in the United States for profiteering. Mylan Pharmaceuticals, which holds a near-monopoly position on the epinephrine injectors used by millions against severe allergic attacks, was assailed by two powerful US senators for pumping up the price over six years from $100 to more than $500. That has rendered EpiPens unaffordable to many sufferers -- who must replace them each year -- and is costing the government huge sums to stock schools with them and fund insurance programs which pay for them, the lawmakers said Monday. / AFP / Lucas TRIEB (Photo credit should read LUCAS TRIEB/AFP/Getty Images)
This August 24, 2016 photo taken in Hudson, Wisconsin shows Epipens, used to counteract allergic reactions. A five-fold price hike for EpiPen, which allergy sufferers use to counteract life-threatening reactions, has made Mylan the newest drugmaker to come under attack in the United States for profiteering. Mylan Pharmaceuticals, which holds a near-monopoly position on the epinephrine injectors used by millions against severe allergic attacks, was assailed by two powerful US senators for pumping up the price over six years from $100 to more than $500. That has rendered EpiPens unaffordable to many sufferers -- who must replace them each year -- and is costing the government huge sums to stock schools with them and fund insurance programs which pay for them, the lawmakers said Monday. / AFP / Lucas TRIEB (Photo credit should read LUCAS TRIEB/AFP/Getty Images)
HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

NOW WATCH: Self-made millionaire reveals the biggest money mistake you might be making

More from Business Insider:

Read Full Story

Sign up for Breaking News by AOL to get the latest breaking news alerts and updates delivered straight to your inbox.

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners