Biotech and Pharma

West Virginia AG blasts 'irresponsible, sweetheart' EpiPen settlement with Mylan

Heather Bresch, chief executive officer of Mylan NV, listens during a House Oversight and Government Reform Committee hearing in Washington, Sept. 21, 2016.
Andrew Harrer | Bloomberg | Getty Images

There's no home court advantage for Mylan when it comes to the EpiPen controversy.

West Virginia's attorney general Wednesday called on the Justice Department to reject an announced $465 million settlement from Mylan to resolve allegations that the big pharma company shortchanged the Medicaid system in rebates for sales of the anti-allergy device EpiPen.

AG Patrick Morrisey called that yet-to-be-signed settlement announced last month a "sweetheart deal" that is "irresponsible," "woefully deficient," and "not in the best interests of West Virginia" if the amount Mylan has said it will pay is correct.

"It does not nearly pay for the damage done by Mylan and sends the wrong message of leniency to other pharmaceutical companies engaged in the Medicaid market," Morrisey wrote U.S. Attorney General Loretta Lynch.

"Simply put, if the settlement is accepted, Mylan — which, under the terms of the agreement will admit no wrongdoing — wins, while the taxpayers who fund Medicaid and the States that participate in the program, including West Virginia, lose," he wrote.

"Mylan must not be allowed to receive a windfall after flagrantly defrauding the Medicaid Drug Rebate Program."

Morrisey cited a CNBC article in his letter to note that "the $465 million represents a tremendous deal for Mylan, which may actually owe Medicaid nearly $700 million, and which has benefits from soaring stock prices after word of the announcement began to spread."

West Virginian would share in the proceeds of the settlement. Morrisey said his state and other states "would lose millions" under the amount Mylan has said it agreed to pay the Justice Department.

West Virginia is the home state of Mylan CEO Heather Bresch. Her father is U.S. Sen. Joe Manchin, a Democrat who represents that state and once served as its governor. Mylan, a Netherlands-incorporated company that is headquartered in Canonsburg, Pa., has a manufacturing plan in Morgantown, West Va.

Bresch's ties to the Mountaineer State didn't cut any ice with Morrisey.

The Republican AG, in a prepared statement, said that "while Mylan executives and shareholders would be winners" in the settlement, "it is a losing proposition for taxpayers who fund Medicaid and the countless families who rely on EpiPen and are beholden to Mylan's skyrocketing greed."

"The people are fed up with such arrangements, and, frankly, they should be. West Virginia deserves better."

He said that if the Justice Department is unwilling to cancel the settlement, he will asked the state's health department to reject the deal.

The Justice Department declined to comment on the matter, while Mylan wasn't immediately available to respond to CNBC's request.

Morrisey's letter is just the latest call for the Justice Department to cancel its proposed deal with Mylan. Sen. Elizabeth Warren, D-Mass, two weeks ago sent Lynch a letter calling the settlement "shamefully weak." Sen. Richard Blumenthal, D-Conn., has asked Lynch to reject the settlement.

The Senate Judiciary Committee has scheduled a Nov. 30 hearing to examine the settlement.

Mylan has been under withering criticism from customers and Congress since August after the company hiked the price to more than $600 for a two-pack of Epi-Pen auto-injectors. In the past several years, EpiPen's price has risen more than 500 percent. The device is used to counteract the potentially fatal allergic reaction known as anaphylaxis.

The controversy spurred questions about whether Mylan was paying the correct level of rebates for EpiPen to Medicaid, the system that provides health coverage to primarily poor people. Medicaid is administered by both federal and state governments.

For years, Mylan has paid a rebate rate of 13 percent to Medicaid on sales of EpiPen through the program. That rate is the level owed by sellers of generic drugs. Mylan claimed it was classifying EpiPen as a generic based on long-standing guidance from the federal Centers for Medicare and Medicaid Services.

But CMS said in October that it had repeatedly told Mylan that EpiPen should be classified as a brand-name product, and be subject to a rebate rate of at least 23.1 percent. The actual rate would be higher — possibly much higher, because brand-name drugs that increase in price higher than the inflation rate are subject to an adjustment upward of their rebate rate.

The agreement Mylan announced last month said the company would begin paying rebates for EpiPen as a brand-name product next April. But the company has not revealed the actual percentage rate it will pay.

The Justice Department has not released further details of the settlement.