September 21, 2016—Senate Finance Committee Republicans yesterday joined House Energy & Commerce Committee Republicans in calling for an independent investigation of oversight of the Medicaid drug rebate program. [ms-protect-content id=”2799″]
In a Sept. 20 letter to Health and Human Services Inspector General Daniel R. Levinson, the senators said “the recent controversy surrounding Mylan’s prescription drug product EpiPen raises questions about the controls in place to ensure that drug manufacturers are paying appropriate rebates.”
“The categorization of prescription drugs as generics instead of branded drugs has real financial impacts” on the Medicaid drug rebate program, the senators wrote. “We are concerned that the controls in place, if any, are inadequate to ensure that Medicaid is receiving the full amount of rebates afforded to it by law.”
Embattled Mylan CEO Heather Bresch is due to be grilled by a House committee this afternoon about why her company more than quintupled the price of EpiPen anaphylaxis rescue injectors since 2004 and why it classified the products as generics for rebate purposes.
In general, state Medicaid agencies get a standard rebate of 23.1 percent of average manufacture price for brand-name drugs, or greater in certain circumstances, but only 13 percent of AMP for generics. If drugs that should be classified for rebate purposes as brand-name products are misclassified as generic products, the states lose money. Hospitals and other healthcare providers in the 340B program could lose out as well. The 340B ceiling price is a drug’s AMP minus its Medicaid rebate amount. Not only is the standard 23.1 percent rebate amount for brand-name drugs higher than the 13 percent rebate for generics, but if a brand-name drug’s AMP outpaces inflation, the manufacturer pays an even bigger rebate. This, in turn, should result in a lower 340B price. This inflation penalty has always applied to brand-name drugs but not generics. It will apply to generics for the first time beginning in 2017.
The Senate Finance GOP letter noted that, in 2009 Mylan paid $118 million to settle state, federal, and whistleblower claims that the company underpaid Medicaid for several Mylan drugs. Then as now, the issue was improperly designating brand name drugs as generics. Although it didn’t come up in the Senate letter, it’s worth noting that 340B healthcare providers received $7.3 million in the settlement.
Last week, House Energy & Commerce Republicans specifically raised the 340B matter among other questions in its letter to Levinson asking for an investigation.
“Because the 340B ceiling price is linked to the Medicaid rebate amount, how drugs are classified under the Medicaid Drug Rebate Program would presumably affect the prices covered entities pay for drugs through the 340B program,” the E&C Republicans pointed out in their letter to the OIG. “Accordingly, what are the implications for covered entities in the 340B program from CMS allowing Mylan to misclassify EpiPen?” [/ms-protect-content]