September 13, 2016—House Energy & Commerce Health Subcommittee Republicans want to know how the 340B drug discount program has been affected by the EpiPen allergic emergency drug’s apparent misclassification as a generic rather than brand name product for Medicaid rebate purposes.
The GOP lawmakers raised the 340B matter among other questions in a Sept. 12 letter to the Department of Health and Human Services Inspector General asking for “an independent audit” of Centers for Medicare & Medicaid Services’ oversight of the Medicaid drug rebate program. Fifteen out of 17 Republicans on the E&C Health subcommittee, including full committee chair Fred Upton (Mich.) and subcommittee chair Joe Pitts (Pa.), signed the letter. They want OIG to begin “as soon as practical.”
The E&C Republicans said they want the investigation to extend beyond the particulars of the scandal over drugmaker Mylan’s exorbitant price increases for EpiPen. They specifically asked OIG to find out what CMS is doing “to identify other situations similar to the EpiPen case.”
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.
“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?”
Soon after the EpiPen pricing scandal broke, concerns were raised to members of Congress that CMS was treating EpiPens as generic drugs for Medicaid rebate purposes while the Food and Drug Administration was treating EpiPens as a brand-name medicine for other purposes. In addition to the E&C Republicans, other groups of lawmakers have been writing to HHS for an explanation. Sens. Amy Klobuchar (D-Minn.), Charles Grassley (R-Iowa), and Richard Blumenthal (D-Conn.) wrote to the head of CMS while Sen. Ron Wyden (D-Ore.) and Rep. Frank Pallone (D-N.J.) wrote to HHS Secretary Sylvia Mathews Burwell. Sen. Kirsten Gillibrand (D-N.Y.) joined Sens. Klobuchar and Blumenthal in still another letter to Secretary Mathews.
In related news, the Senate Special Committee on Aging, the Senate Permanent Subcommittee on Investigations, and the House Oversight Committee have all launched bipartisan investigations into Mylan. Senator Grassley, meanwhile, says Mylan’s response to his Aug. 22 letter seeking details about EpiPen’s price increases “doesn’t answer all of my questions.”