Biotech and Pharma

Sen. Warren blasts Mylan EpiPen settlement as 'shamefully weak,' wants answers

Sen. Elizabeth Warren (D-MA)
Win McNamee | Getty Images

Sen. Elizabeth Warren is angry again — this time about the $465 million settlement Mylan agreed to pay to settle claims the drug giant shortchanged the federal government in rebates to Medicaid for EpiPens.

Warren, D-Mass., lit into the Justice Department on Friday accusing it of cutting what is a "shamefully weak" and "shockingly soft" settlement, if details revealed by Mylan about the deal are true.

"If the terms of the settlement announced by Mylan are accurate, the American public has a right to know why and how DOJ reached a settlement that failed to hold this corporate criminal responsible," Warren wrote Attorney General Loretta Lynch.

Warren told Lynch that her department's "limp response to Mylan's deliberate fraud raises serious questions about how exactly you plan to police other companies if you approve settlements that show that crime does pay."

Warren said the deal announced Oct. 7, among other things, may have "rewarded" Mylan by allowing the company to keep $65 million that it made by "defrauding Medicare and Medicaid," the two huge government-run health-coverage programs.

The $65 million represents the difference between the $465 million settlement will cost Mylan and the $530 million that Warren's staff calculated Mylan underpaid in Medicaid rebates.

Hours before the settlement was announced, Evercore ISI senior analyst Umer Raffat said, during a webinar, that Mylan may have shortchanged Medicaid $707 million over the past five years, based on an estimate cited by the National Association of Medicaid Directors.

The head of the Medicaid and Medicare systems has said that Mylan was repeatedly told that it had misclassified the lifesaving EpiPen as a generic, as opposed to brand-name device for the purposes of a Medicaid drug rebate program. That misclassification, in turn led to the company underpaying the federal government, according to Andy Slavitt, acting administration of the federal Centers for Medicare and Medicaid Services.

"If these details are correct," Warren said of the terms disclosed by Mylan, "they reveal the settlement to be shockingly weak, with no criminal penalty and no deterrent value to prevent drug companies from engaging in abusive schemes to defraud Medicaid and rip off taxpayers."

"This settlement is shockingly soft on this corporate wrongdoer," the senator wrote Lynch.

"To summarize, if terms of the agreement announced by Mylan are correct, Mylan wrongly classified EpiPen to maximize its Medicaid revenue and did not change this classification despite being expressly told by CMS that it was wrong," Warren wrote.

"The Justice Department has rewarded Mylan by imposing a fine that is about $65 million less than the amount Mylan made by defrauding Medicare and Medicaid. In addition, you permitted Mylan to avoid admission of wrongdoing, collected no additional penalties under the False Claims Act, and blocked other actions against the company that would have required greater accountability."

Mylan NV EpiPen 2-Pak medication
George Frey | Bloomberg | Getty Images

Warren's scathing letter comes on the heels of a similar complaint about the settlement made earlier this week by her fellow Democratic senator Richard Blumenthal of Connecticut, who called on the Justice Department to reject the deal.

Mylan declined to comment on Warren's letter. The company has previously said it was working with the Justice Department to finalize the settlement.

The Justice Department did not immediately respond to a request for comment.

Mylan has been under heavy public criticism since August, when outrage exploded over the company having hiked the price of EpiPens by more than 500 percent in recent years.

A two-pack of the auto-injector EpiPens, which are used to counteract the potentially fatal allergic reaction anaphylaxis, now costs more than $600. Many people with allergies or their parents feel they need to buy multiple packs of EpiPens, every year or so, to have in several locations, such as home, school, office and car.

Mylan, in response, has increased the level of financial assistance available to many consumers. It also plans on selling a generic version of EpiPen for about $300.

But increased attention on the company raised questions about whether it was paying the nation's Medicaid system, which covers primarily poor people, the correct rebates for EpiPens.

Under the rebate program, sellers of generic drugs pay 13 percent of their sales through Medicaid back to Medicaid, which in turn splits that money with the federal and state governments that jointly run it.

But sellers of brand-name drugs have to pay a rebate rate of 23.1 percent. And the rebates for brand-name drugs are even higher than that — sometimes much higher than that — if their sellers have raised the prices beyond the rate of inflation.

An analysis has found that if Mylan was paying the brand-name rebates, last year it would have rebated Medicaid nearly all the money it made in sales through Medicaid because of the inflation-adjustment enhancement.

Mylan for weeks had claimed it was paying the correct rebates, citing guidance previously issued for EpiPens by CMS.

But shortly after CMS chief Slavitt came out publicly and said the company had been told otherwise, the company reached a surprised settlement agreement with the Justice Department, without admitting any wrongdoing. As part of that deal, the company agreed to pay the higher rate for brand-name drugs starting next April 1. But neither Mylan nor the Justice Department has disclosed what rebate rate it will pay.

The settlement doesn't resolve all rebate-related issues for Mylan.

The company has disclosed it is being investigated by the Securities and Exchange Commission in connection with the rebates.

And there are questions about whether Justice's settlement with Mylan would preclude individual states from pursuing their own rebate-related legal actions against the company.

In a recent blog post, attorneys Ellyn Sternfield and Rodney Whitlock of Mintz Levin wrote that the Justice Department "does not have the authority to settle states' individual drug rebate claims against Mylan, which means any potential 'global' settlement with the states raises a variety of issues."

Those issues include the fact "Medicaid Drug Rebate settlement terms for each individual state will have to be agreed to by each individual participating state's Attorney General and in many states, also by the State Medicaid Agency," the lawyers wrote.