Taxpayers Overpaid $1.27 Billion for EpiPen, HHS Estimates

The HHS Office of Inspector General has found that American taxpayers paid $1.27 billion more than they should have for the EpiPen over a 10-year period, according to an estimate sent to the Senate Judiciary Committee and released Wednesday by its chairman, US Senator Chuck Grassley (R-Iowa).

Grassley’s move is the latest salvo in the government’s dispute over EpiPen, the life-saving injector for epinephrine used by those with severe allergies. Last summer, EpiPen became the latest symbol of public outrage over escalating drug prices, as parents learned of another price increase while restocking supplies before the of a school year. Prices have increased steadily since Mylan gained control of the product, and anger over the injector’s $600 price for 2 pens reached a boiling point.

Attention soon turned to the prices Mylan was charging Medicaid for its product. Mylan had historically classified the EpiPen as a generic product and, therefore, reduced the amount paid under the Medicaid Drug Rebate Program. But amid last summer’s furor, Mylan suddenly rolled out a new “generic” EpiPen, causing Grassley to ask why its rebates had not been higher from 2006 to 2016.

Mylan moved to settle with CMS, and was reportedly ready to pay $465 million after negotiating with the Department of Justice. However, in a letter to Judiciary Committee Counsel Josh Flynn-Brown, HHS Inspector General Director of External Affairs Christopher S. Seagle outlines a calculation method that leads a much higher amount. “Based on the methodology and limitations described below, we determined the Estimated Rebate Differential to be $1.27 billion for 2006 through 2016,” the letter states.

That the amount owed is so much more than discussed is something taxpayers should worry about, according to Grassley.

“Mylan and the Obama administration reportedly were close to settling the overpayment for much less than $1.27 billion," he said in a statement. "CMS recently provided records to the Committee that show Mylan was made aware of the misclassification years ago, but did nothing. It looks like Mylan overcharged the taxpayers for years with the knowledge EpiPen was misclassified, and the previous administration was willing to let the company off the hook."

Many have noted that Mylan’s CEO, Heather Bresch, is the daughter is US Senator Joe Manchin (D-West Virginia).

“The fact that Mylan is unwilling to cooperate and provide documents voluntarily makes me wonder what there is to hide and whether a subpoena is the only way to get to the bottom of this,” Grassley said.

The rise of high-deductible plans has been cited by many experts as a reason why public outrage over EpiPen prices increased in the past year. In the past, price increases were absorbed by payers, but consumers only paid their co-payment and were unaware of the underlying cost, since a drug like EpiPen would have been considered essential for a person with severe allergies.