EpiPen's Mylan Settles Medicaid Dispute for $465M

The maker of the EpiPen, Mylan NV, agreed Friday to pay $465 million to end claims from the US Department of Justice and federal healthcare agencies over the company’s failure to adequately pay Medicaid rebates.

Drug companies pay rebates of 13% for generics and 23.1% for brand-name drugs, which gives the government some savings, but far less than would be the case if the government could use its market power to negotiate discounts.

In Mylan’s case, however, the company classified the EpiPen as a generic and paid the smaller rebate for $960 million worth of product purchased between 2011 and 2015. This happened even though Mylan was charging consumers and health plans ever-increasing prices for the pens as brand-name products, based not on the epinephrine drug itself but on the design of the autoinjector.

According to letters from CMS Acting Administrator Andy Slavitt that were made public, the agency had repeatedly told Mylan that EpiPen could not be classified as a “non-innovator,” the category that paid the 13% rebate. The company was facing significant penalties, as it could have been fined $100,000 per violation.

In a statement, Mylan said the terms of the settlement “do not provide a finding of wrongdoing on the part of Mylan Inc, or any of its affiliated entities or personnel.” The company went on to state that the “non-innovator” classification was based on “longstanding written guidance from the federal government.”

“This agreement is another step in Mylan’s efforts to move forward and bring resolution to all EpiPen Auto-Injector related matters,” said CEO Heather Bresch.

EpiPen has attracted unprecedented media attention and public scorn, and Bresch has been brought before Congressional committees to testify after a social media campaign drew attention to steep price hikes for the EpiPen since Mylan acquired the product in 2007. The cost has increased more than 500% to $600 for a pair of pens. Bresch has overseen the company while Congress passed laws to lay the groundwork to make EpiPens mandatory in every school.

While the product is considered a lifesaver for adults and children with severe allergies who experience anaphylactic shock, families who have to replace the pens every 18 months have grown weary of the price hikes, especially with the rise of high-deductible plans. The uproar over the cost increases reached a peak in the back-to-school season, when many families were replacing their supplies of pens.

Since early September, Mylan has agreed to launch a generic version of the EpiPen and has overhauled its patient access program.