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Mylan EpiPen settlement with US government remains in flux

Mylan NV has not yet reached a settlement with the U.S. government over claims that the drugmaker overcharged for the firm's emergency anaphylaxis medicine EpiPen, the outgoing head of the Centers for Medicare and Medicaid Services said.

The company said in October 2016 that it had agreed to settlement terms with the U.S. Department of Justice and other government agencies to resolve allegations that the firm had incorrectly classified EpiPen for the Medicaid program as a generic drug rather than a brand-name medicine. The misclassification had resulted in the company underpaying Medicaid rebates and overcharging states for the product.

Mylan said it would pay $465 million to settle the mix-up with Medicaid, which provides healthcare coverage for low-income Americans.

But in a Nov. 14, 2016, letter to Sen. Charles Grassley, R-Iowa, chairman of the Senate Judiciary Committee, the Justice Department disavowed ever reaching such a deal with Mylan.

Since then, nothing has changed, CMS administrator Andy Slavitt told Grassley in a Jan. 18 letter, in one of the last of the outgoing agency chief's actions before he departed under the transition to a Trump administration. Mylan did not immediately respond to requests for comment.

Grassley said he found Slavitt's explanation about how the EpiPen misclassification occurred "lackluster and very disappointing."

In his Jan. 19 statement, the Iowa Republican questioned Slavitt's remark that CMS has limited authority to act if a manufacturer improperly classifies a drug.

"If that's the case, why didn't Congress hear this before now?" Grassley said. "Is the intent to do little or nothing and then when confronted, blame the inaction on a supposed lack of authority? Didn't CMS have the authority and the obligation to report clear violations of the law to the Justice Department and if so, has it done so in the case of EpiPens and other misclassified drugs? CMS is trying to dodge responsibility for a problem that likely cost the taxpayers hundreds of millions of dollars and damaged Medicaid program integrity. This won't stand."

Congress created the Medicaid drug rebate program nearly 30 years ago to leverage the large volume of drugs the government purchases on behalf of low-income beneficiaries to obtain price concessions from pharmaceutical manufacturers.

More than 600 drug manufacturers participate in the program, with 23,385 medicines subject to rebates, Slavitt said.

Over the past 25 years, the program has brought in $244.7 billion in rebates, he said.

Manufacturers have the responsibility to properly report the classification and ensure they are paying the correct rebate amounts, Slavitt said. If it comes to CMS' attention the manufacturer's drug categorization is incorrect, the agency notifies the company and attempts to reach an agreement, he said.

"Manufacturers that do not comply with classification requirements are in clear violation of the law," Slavitt said. "No amount of legal obfuscation disguises the fact that these companies are defaulting on their obligations."

But he said the law does not "expressly provide" CMS the authority to compel a drugmaker that has incorrectly reported its classification to change it.

CMS has taken a number of steps over the past seven years to improve the classification reporting process, Slavitt said.

But he said Congress needs to take action to strengthen CMS' ability to hold companies accountable if they fail to comply with the legal requirements of the Medicaid rebate program.

Grassley had planned to hold a hearing on the EpiPen misclassification, but ended up postponing it after the Justice Department, CMS and Mylan all refused to testify.

The Office of Inspector General for Health and Human Services is examining how misclassifications occur.

Grassley had also asked the Securities and Exchange Commission to probe the situation with Mylan.

EpiPen initially grabbed Capitol Hill's attention in 2016 when patients complained that the list price of the life-saving product had leaped to over $600. A closer look revealed the Medicaid program had been overpaying for the product.