Citing Mylan, Senators Seek to Close Medicaid Rebate Loophole With Bipartisan Bill

Citing a 2016 case where Mylan, the maker of the branded epinephrine autoinjector EpiPen, paid the government hundreds of millions of dollars to settle the company’s failure to adequately pay Medicaid rebates, 2 senators introduced a bipartisan bill that attempts to prevent similar issues.

Senate Finance Committee Ranking Member Ron Wyden, D-Oregon, and Senator Chuck Grassley, R-Iowa, the senior member of the committee, introduced a bill called the Right Rebate Act, aiming to give Medicaid more tools to go after drug manufacturers when they are suspected of misclassifying a drug as generic when it should be brand name. They said the bill would fix an issue in Medicaid that has allowed pharmaceutical manufacturers to misclassify their drugs and overcharge taxpayers by hundreds of millions of dollars.

In 2016, Mylan was found to have drastically increased prices since it began selling the emergency allergy treatment it acquired, but did not develop, in 2007. A series of price increases (more than 500% total) led to a $608.61 price for a 2-pack of the device.

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

Mylan classified the EpiPen as a generic and paid the smaller rebate for $960 million worth of product purchased between 2011 and 2015. This happened as 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.

Without admitting any fault, Mylan settled with the federal government for $465 million.

Under the proposed bill, HHS would have the authority to reclassify drugs, impose civil monetary penalties, and recover incorrect rebate payments. It would also create oversight mechanisms. HHS would have to tell Congress about how its new authorities have been used and the actions that have been taken to reclassify drugs.

“While families struggle to afford medicines like EpiPen, drug makers are busy manipulating the system to squeeze taxpayers even more,” Wyden said in a statement. “This bipartisan bill will crack down on Big Pharma’s games and help prevent them from taking advantage of Medicaid, a program meant to protect the most vulnerable. I am hopeful that this legislation will become law by the end of the year and set the tone for the important work that lies ahead to lower prescription drug prices for families across the country.”

“Misclassification of prescription drugs hurts millions of Americans whose lives depend on those medications, such as EpiPen, but can’t afford them due to unnecessarily exorbitant pricing,” Grassley said. “This legislation is a significant step forward to fixing the problems in our health care system that have allowed pharmaceutical manufacturers to price gouge taxpayers and consumers for too long.”