by Ben Vernia | September 5th, 2017
On August 17, the Department of Justice announced that the pharmaceutical company Mylan and its subsidiary had agreed to pay $465 million to the federal and state governments to settle allegations, originally brought by the company’s competitor, Sanofi-Aventis US LLC, that it had defrauded the Medicaid program by falsely declaring its epinephrine syringe, the Epi-Pen, to be a generic device. According to DOJ’s press release:
Pharmaceutical companies Mylan Inc. and Mylan Specialty L.P. have agreed to pay $465 million to resolve claims that they violated the False Claims Act by knowingly misclassifying EpiPen as a generic drug to avoid paying rebates owed primarily to Medicaid, the Justice Department announced today. Mylan Inc. and Mylan Specialty L.P. are both wholly owned subsidiaries of Mylan N.V., which is headquartered in Canonsburg, Pennsylvania.
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Congress enacted the Medicaid Drug Rebate Program to ensure that state Medicaid programs were not susceptible to price gouging by manufacturers of drugs that were available from only a single source. It therefore subjected such single-source, or brand name drugs, to a higher rebate that is payable to Medicaid and that increases to the extent the price of the drug outpaces the rate of inflation. In contrast, generic drugs originating from multiple manufacturers are subject to lower rebates that, at least until recently, were not subject to inflationary adjustments.
The settlement resolves the government’s allegations that Mylan, by erroneously reporting EpiPen as a generic drug to Medicaid despite the absence of any therapeutically equivalent drugs, was able to demand massive price increases in the private market while avoiding its corresponding rebate obligations to Medicaid. Between 2010 and 2016, Mylan increased the price of EpiPen by approximately 400 percent yet paid only a fixed 13 percent rebate to Medicaid during the same period. The government further alleged that although Mylan was well-aware that its drug was not a generic, it nevertheless claimed generic status for EpiPen in the Medicaid program to avoid paying a higher rebate.
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In addition to the payment, Mylan entered into a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General.
Sanofi-Aventis will receive $38.7 million of federal share of the settlement (DOJ did not describe the federal/state split of the total, making it impossible to compute the percentage share to the relator).
