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Taxpayers fueled much more of Mylan's EpiPen revenue as prices rose sharply

A pharmacist holds a package of EpiPens epinephrine auto-injector, a Mylan product, in Sacramento, Calif.
Rich Pedroncelli | AP
A pharmacist holds a package of EpiPens epinephrine auto-injector, a Mylan product, in Sacramento, Calif.

As EpiPen prices grew and grew and grew, it was increasingly American taxpayers that were footing the bill.

The share of revenue that big drug maker Mylan got for its life-saving EpiPen from taxpayers more than doubled in the past five years — a period when prices of the anti-allergy device climbed more than 350 percent, a US Senator said Thursday.

Sen. Chuck Grassley, R-Iowa, said his office compared newly released information from the government-run health coverage programs Medicare and Medicaid to Mylan's filings with the Securities and Exchange Commission.

"The Grassley analysis finds that the share of Mylan's revenue for EpiPens from the taxpayers went up each year from 2011 to 2015, from 23.3 percent in 2011 to 53.4 percent in 2015," the senator's office said.

"Total government charges for EpiPens increased 463 percent while EpiPen unit sales at large increased only 51 percent from 2011 to 2015," the office said. "This is beyond the over-charging for EpiPens under a Medicaid misclassification, which Grassley is pushing the Centers for Medicare and Medicaid Services (CMS) to explain."

Grassley said, "This analysis shows Mylan received a lot of money from taxpayers. The company did this by substantially increasing the price of EpiPens. The majority of Mylan's EpiPen revenue growth came from Medicare and Medicaid."

"For whatever reason, Mylan's results indicate it found more success selling EpiPens through government programs than through the private insurance market," the senator said.

Grassley's salvo is the latest in a series of shots Congress has fired at Mylan since outrage erupted in August over the company having raised EpiPen prices to more than $600 per two-pack of the auto-injectors this year. Since 2007, Mylan has raised the price of EpiPen by more than 500 percent.

Customers often buy multiple packs of EpiPens to keep at home, the office, their car or school in the event they or their children experience the potentially fatal allergic reaction anaphylaxis,

Grassley's comments came a day after the head of the federal Centers for Medicare and Medicaid Services said that Medicaid and Medicare Part D had paid nearly $1.3 billion in EpiPen purchases from 2011 through 2015, before factoring any rebates from Mylan.

In 2011, Medicaid, which covers primarily poor people, spent $66.4 million on EpiPens. That spending more doubled, to $157.5 million by 2013, and then more then doubled again to $365 million as of last year.

Medicare Part D, the prescription drug benefit program that covers primarily senior citizens, spent $20 million on EpiPens in 2011. Part D spending on EpiPen more than trebled to $63 million in 2013, and then almost doubled to $121.7 million in 2015.

Mylan had no comment on Grassley's remarks.

But the company has said that Mylan's net revenues from Medicaid were about 20 percent, around the same amount percentage-wise that it has earned from the program in the last several years. Mylan also has noted that the CMS tallies did not include any supplemental rebates that the company pays states for their Medicaid program, nor do they include fees Mylan pays to wholesalers and others that reduce its net revenues.

The EpiPen spending tallies were included in a letter to Sen. Ron Wyden, D-Ore., from Andy Slavitt, the acting administrator CMS.

In that same letter, Slavitt confirmed that CMS, on "multiple occasions," had told Mylan that it was misclassifying EpiPen as a generic product for the purpose of the Medicaid Drug Rebate Program, and that it should be classified as a brand-name device.

Under that rebate program, companies that sell generic drugs or products through Medicaid pay a 13 percent rebate to Medicaid. However, companies that sell brand name products pay a rebate rate of at least 23.1 percent, And companies that hike the price of their products above the rate of inflation are required to pay an additional amount in rebate.

Slavitt said that EpiPen, which was purchased by Mylan in 2007, had been misclassified for the rebate program since late 1997, which "has financial consequences for the government" because it reduces the amount of rebates paid on Medicaid sales of the devices.

Slavitt said he could not comment on the total amount of rebates Mylan owes related to "this incorrect misclassification." He did note, however, that Medicaid alone paid a total of $960 million on EpiPen from 2011 to 2015, but that the net spending, after the 13 percent rebate was taken into account, with other factors, was $797 million.

Wyden and Rep. Frank Pallone Jr., D-NJ, said Wednesday that Slavitt's letter "is more evidence that while Mylan irresponsibly raised the price of EpiPen, they were also bilking taxpayers out of millions of dollars."

"We will ensure taxpayers gets their due," the congressmen said.

Slavitt's letter had said that while CMS notified drug makers about the correct classification of their products, "it is the manufacturer's responsibility to report accurate product and pricing data to the Medicaid Drug Rebate Program." Manufacturers can be fined up to $100,000 per item of false information they submit under the rebate agreement, he said.

Grassley on Thursday noted that "CMS says it warned Mylan about misclassifying the EpiPen under Medicaid but it's unclear what steps it took to challenge the misclassification."

"The agency has the authority to impose penalties in misclassification cases. If the Obama Administration didn't use the authority in this misclassification case, why not?" Grassley asked.

"The taxpayers depend on enforcement to make sure every dollar is well-spent. I'll continue to work on this for the people of Iowa and taxpayers in general."

In a statement to CNBC on Wednesday in response to Slavitt's letter and the claims by Wyden and Pallone, Mylan reiterated that it was following guidance from the federal government on the classification of EpiPens and it referred to a new government rule that intends to clarify ambiguities in Medicaid rebate law.

"The new process calls for the submission of an application for non-innovator status to be submitted to CMS on or before April 1, 2017," Mylan said. "It would be premature to comment further on this issue until the CMS process has concluded."

Regarding the CMS letter, "Any changes made to the rebate classification in 1997 pre-dated Mylan's acquisition of the product by almost a decade," the company said. "The longstanding written guidance provided by the federal government is consistent with how the product was classified dates back to the 1997 time frame."