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Congress will hold a hearing on Mylan's big EpiPen settlement with Justice Department

Sen. Chuck Grassley, R-Iowa.
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Sen. Chuck Grassley, R-Iowa.

The less Mylan and the Justice Department say about their big settlement over EpiPen, the more Congress wants to hear about it.

The Senate Judiciary Committee will hold a hearing Nov. 30 to examine Mylan's agreement to pay the federal government $465 million to settle potential claims that the big drug company shortchanged Medicaid over rebates for sales of the anti-allergy EpiPen devices.

The hearing was called by committee chairman Sen. Chuck Grassley, R-Iowa. He is just one of several senators who has expressed frustration over the deal, with some calling for more disclosure about yet-to-be-signed agreement or for it to be scrapped altogether.

The quickly arranged settlement announced by Mylan on Oct. 7 allows the company to escape potential criminal prosecution over the matter, avoid having to admit any wrongdoing, and to not pay a higher rebate rate for EpiPen until next spring.

"Mylan's management of the EpiPen has not only led to higher costs for patients and their families, but also for taxpayers in Iowa and across the nation by misclassifying its product to dodge higher Medicaid rebate requirements," Grassley said.

"Americans deserve to know what the government is doing to hold Mylan accountable, recoup lost tax dollars and prevent similar behavior in the future," Grassley said.

A press release from Grassley's office noted that key details of the agreement and the background for it have yet to be revealed.

They include the question of where Mylan's payment is "proportional to what Mylan overcharged taxypayers," as well as "how much of the settlement would be returned to the states," who with the federal government jointly run Medicaid, which covers primarily poor people.

Another question is how much, if any, penalties under the federal False Claims Act would apply to the deal.

Mylan and the Justice Department also have refused to reveal what rebate rate the company will pay for EpiPen starting in April.

A list of witnesses for the Senate committee hearing has yet to be announced.

In addition to looking at the Mylan deal, Grassley said the hearing will look at whether the federal government is doing enough with its current authority to prevent drug companies from misrepresenting their products to government programs, and what officials are doing to hold companies accountable for that.

A spokeswoman for Mylan declined to comment on the hearing. In the past, the company has declined to reveal additional details about the agreement, as has the Justice Department.

The deal was prompted by a firestorm of criticism by consumers and Congress over Mylan having hiked the price of the life-saving EpiPens to more than $600 for a twin-pack this year. The auto-injector devices are used to counteract the potentially fatal allergic reaction anaphylaxis.

Amid that criticism, questions were raised whether Mylan should have been paying a rebate rate of at least 23.1 percent — and probably well more than that — to Medicaid for EpiPen sales, instead of the 13 percent rate it had been paying.

The lower rate is owed by generic products, and the higher rates are paid by brand-name products.

Mylan claimed that it was paying the lower-rate under long-standing guidance from the federal Centers for Medicare and Medicaid Services. But CMS recently said that it had repeatedly told Mylan it should be paying the higher rate.

Brand name drugs whose prices are increased above the rate of inflation can pay a much higher rebate rate than 23.1 percent because of an adjustment provision in the Medicaid Drug Rebate Program. Under that program, drug companies that want to sell medications to enrollees in Medicaid must pay back a percentage of their sales to Medicaid.

Because Mylan has increased EpiPen prices more than 500 percent in recent years, analysts have suggested that the rebates owed to Medicaid by the company could nearly equal what it makes in sales through Medicaid.

Sen. Elizabeth Warren, D-Mass, last week sent Attorney General Loretta Lynch a letter saying that the deal with Mylan appeared to be "shamefully weak." Warren said her staff had calculated that under the agreement Mylan may have been allowed to keep $65 million it should have paid the government in rebates.

However, Evercore ISI analyst Umer Raffat has said that if CMS told Mylan as far back as 2011 that it was paying the incorrect rebate rate, the company may have shortchanged Medicaid more than $700 million since then in rebates. That would be more than $235 million more than what Mylan has agreed to pay under the Justice Department settlement.

However, CMS has not revealed when it first told Mylan it was paying the correct rebate rate.

The Wall Street Journal on Thursday reported that Mylan executives, including CEO Heather Bresch, are unlikely to see their compensation reduced as a result of the $465 million settlement, because of the of the company 's practice of excluding litigation costs from pay calculations.