- Thomson Reuters
Sen. Elizabeth Warren of Massachusetts would like to know if the Department of Justice is for real right now.
A few weeks ago, the pharmaceutical company Mylan announced that it had settled with the DOJ for overcharging the Centers for Medicare & Medicaid Services for its EpiPen allergy drug over multiple years.
The tab, the company said, would come to $465 million. Under the terms, Mylan would not admit to any wrongdoing for classifying its drug as a generic rather than a branded medication. Makers of brand-name drugs have to pay higher rebates to states than makers of generics – 23.1% versus 13%. They also have to pay additional rebates if their prices rise more than inflation. Warren, in a letter to the Department of Justice, just flagged two issues with the deal. The settlement is smaller than it should be, but it’s also possible that what Mylan announced isn’t even right.
Warren’s staff did its own calculation for how much Mylan might have made from this misclassification, and she thinks the company owes the government $530 million.
From the letter:
“To summarize: If the terms of the agreement announced by Mylan are correct, Mylan wrongly classified EpiPen to maximize its Medicaid revenue, and did not change this classification despite being ‘expressly told’ by CMS that it was wrong. The Justice Department awarded Mylan by imposing a fine that is about $65 million less than the amount Mylan made by defrauding Medicare and Medicaid. In addition, you permitted Mylan to avoid admitting any admission of wrongdoing, collected no additional penalties under the False Claims Act, and blocked other actions against the company that would have require greater accountability.”
Under the False Claims Act, companies can be fined $5,500 to $11,000 for each false claim they’ve made to the government, plus three times damages.
Mylan came under intense scrutiny in August after it raised the price of a two-pack of its EpiPen injectors to $608 from $100 when it bought the drug in 2007. After Mylan CEO Heather Bresch was called to a hearing Capitol Hill and politicians did a lot of hand-wringing, CMS also figured out that the company had overcharged it. The SEC is also investigating Mylan.
There could be a fib here, guys
Now here’s the thing: To close her letter, Warren was careful to write, “If the terms of this settlement announced by Mylan are accurate …”
And that’s because from Wall Street to Washington, ever since this thing was announced people have been questioning whether Mylan was being honest about it.
The conundrum was part of a note Alliance Bernstein sent out earlier this week:
“‘No executed’ Mylan–DoJ agreement. Last week we noted ‘slight concern’ Mylan may have been too quick to announce it reached agreement on EpiPen. This week, Senator Grassley demanded more disclosure on the deal and a DC newsletter noted that ‘There is no executed settlement agreement,’ a Justice spokesperson said by email in response to Inside Health Policy inquiry about the mere existence of a settlement. ‘The Department declines to comment on the company’s announcement’. This could be just keeping a stiff upper lip, but does not do much to make us feel this is a ‘done deal’.”
So someone at the DOJ says there’s no agreement, and Sen. Chuck Grassley of Iowa has been poking around asking questions.
So, Mylan, do you have an agreement or not? Warren is not the only one who wants to know.
A Mylan spokesperson objected to the idea that its announcement of a settlement was misleading, noting that Mylan said all along it still had to finalize the agreement. We asked whether, then, it was a mistake for Mylan to say that it “agreed to terms” with the DOJ, and the company just pointed to its original press release. But if the right answer is that the terms aren’t final, then Warren’s letter to the DOJ could spell bad news for the company. Because she’s not satisfied with what we do know:
“But it appears that none of these penalties was used against Mylan or its senior executives, despite the fact that the company was “expressly told” of its misclassification by CMS, despite the fact that this was the second time in less than a decade that the company was caught defrauding Medicaid16 and despite the fact that the company made hundreds of millions of dollars on the backs of taxpayers. Your department’s limp response to Mylan’ s deliberate fraud raises a serious question about exactly how you plan to police other companies if you approve settlements that show that crime does pay.”