Federal spending on EpiPen devices jumped 463 percent over 5 years

WASHINGTON – Federal Medicare and Medicaid payments for Mylan Pharmaceutical's EpiPen epinephrine injector rose from roughly $86 million in 2011 to about $487 million in 2015, the Centers for Medicare and Medicaid Services (CMS) told U.S. Sen. Amy Klobuchar Wednesday.

The five-year, 463 percent spending increase by the federally run health insurance programs will likely add to the uproar over Mylan's pricing policies that have already sparked charges of price gouging and congressional hearings.

Klobuchar had asked the Department of Health and Human Services, of which CMS is a subdivision, to account for EpiPen spending. She also sought information on what CMS said was the misclassification of EpiPen as a generic rather than a brand-name product. The generic designation has enriched Mylan by allowing it to substantially reduce Medicaid rebates it paid back to the government.

"It's an incredible amount of money," Klobuchar said of the overall $1.3 billion the government spent on EpiPens in the five-year period. "The missing piece is knowing how much misclassification might have cost taxpayers."

Minnesota officials have estimated that in 2016 Mylan paid the state $4 million less in rebates than it would have if EpiPen had been considered brand name.

The classification process described in a letter from CMS acting administrator Andrew Slavitt to Klobuchar sounded like "a giveaway to pharmaceutical companies," the Democratic senator said. "It calls for changes in how the government reacts when companies misclassify drugs."

Mylan has said it complied with all the rules to classify EpiPen as a "non-innovator multiple source drug" eligible for a rebate rate 10 percent lower than what it would pay for "innovator" status.

But Slavitt told Klobuchar that "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."

Slavitt said CMS has told Mylan "on multiple occasions" that EpiPen 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," Slavitt wrote.

EpiPen had brand-name status before the fourth quarter of 1997, Slavitt said, then changed to generic status.

Klobuchar said she is considering legislation that would apply automatic penalties to misclassified drugs. She has pressed CMS for information on how many other brand-name drugs it considers misclassified and how much that is costing taxpayers. Collectively, said Klobuchar, "it could be billions."

Slavitt, a former UnitedHealth Group executive in Minnesota, pointed to a new rule for Medicare-covered drugs that he said "make clear that covered outpatient drugs that have patent protection or statutory exclusivity" cannot be classified generic.

Still, Mylan has said it will continue to seek "non-innovator multiple source" generic status under the new rule.

As the debate continues, Klobuchar, Sen. Charles Grassley, R-Iowa, and Sen. Richard Blumenthal, D-Conn., have asked the Justice Department to investigate whether Mylan violated the federal False Claims Act.

Jim Spencer • 202-662-7432