Regulatory Focus™ > News Articles > HHS Inspector General to Examine Medicaid Drug Rebate Program in Wake of EpiPen Fiasco

HHS Inspector General to Examine Medicaid Drug Rebate Program in Wake of EpiPen Fiasco

Posted 12 December 2016 | By Zachary Brennan 

HHS Inspector General to Examine Medicaid Drug Rebate Program in Wake of EpiPen Fiasco

In light of concerns over the misclassification of Mylan’s EpiPen and subsequent overcharging of the federal government for the life-saving allergy drug, the Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) late last week said it will review the Medicaid Drug Rebate Program.

OIG’s review will examine the accuracy of Medicaid drug rebate classification data, the US Food and Drug Administration’s (FDA) approval status for drugs paid for by the Centers for Medicare & Medicaid Services (CMS) and manufacturers’ “reasonable assumptions” when calculating prices for the rebate program, the OIG said in a letter sent last week to Senate Judiciary Chairman Chuck Grassley (R-IA).

Grassley added in a statement: “The more we learn about the misclassifications, the more we know this program is in dire need of proper oversight. It’s unclear whether CMS took any action between 2009 and now to get the EpiPen classification back on track after being told about the misclassification.  If CMS did nothing, that’s a dereliction of duty to the taxpayers.  The OIG is right to look at this program and help determine whether it works or doesn’t work as intended.”


The investigation comes as Mylan in October agreed to the terms of a $465 million settlement with the US Department of Justice and other agencies because EpiPen was classified as a generic drug under the Medicaid Drug Rebate Program, meaning Mylan paid the 13% rebate for generics, instead of the 23% rebate for brand name drugs.

As an October letter from CMS Acting Administrator Andy Slavitt shows, Medicare and Medicaid spending on EpiPen increased from $86 million in 2011 to $487 million in 2015, or 463% (though that does not account for Medicaid or Medicare rebates or other post point-of-sale concessions).

“A review of our records indicates that, prior to 1997, EpiPen was reported as a single source, or brand drug, for the Medicaid Drug Rebate Program. Since the fourth quarter of 1997, EpiPen has been reported as a non-innovator multiple source, or generic drug,” Slavitt wrote to Sen. Ron Wyden (D-OR).

Despite the settlement and misclassification, Mylan CEO Heather Bresch recently defended the price hikes on the EpiPen, saying the company invested in improvements on the drug-device combo product. The company also recently decided to launch authorized generic versions of its EpiPen for half of the price of the branded product.

CMS Inaction?

On Friday, four Republicans – chairman of the House Committee on Energy and Commerce Fred Upton (MI), chairman of the House subcommittee on Health Joseph Pitts (PA), chairman of the Senate Finance Committee Orrin Hatch (UT) and chairman of the House Subcommittee on Oversight and Investigations Tim Murphy (PA) – sent a letter to Slavitt with concerns that CMS knew that the EpiPen was misclassified for years and failed to take action.

By 20 December, the congressmen are requesting a number of documents from CMS on when it realized the EpiPen was misclassified, the dates when it notified Mylan about the misclassification, how much money would have been saved if EpiPen was properly classified and more.

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