CMS finds Mylan overcharged Medicaid for EpiPens for years

The Centers for Medicare & Medicaid Services said this week that Mylan Pharmaceuticals (NSDQ:MYL) has been overcharging Medicaid for its EpiPen auto-injector for years, despite being warned that it should have paid bigger rebates.

CMS said that between 2011 and 2015, Medicaid spent $797 million on the epinephrine auto-injector after deducting rebates, marking the 1st time the federal agency has revealed how much it spent on the device. CMS revealed last week that Mylan misclassified the device as a generic, allowing the company to pay a 13% rebate instead of the 23% allocated for brand-name products.

“This incorrect classification has financial consequences for the amount that federal and state governments spend because it reduces the amount of quarterly rebates Mylan owes for EpiPen,” Acting CMS administrator Andy Slavitt wrote in a letter to Sen. Ron Wyden (D-Ore.), 1 of the many lawmakers who previously suspected that Mylan knowingly misclassified the epinephrine injector.

The Canonsburg, Pa.-based company has been under fire since August, when reports surfaced that it raised the price of its EpiPen product by more than 500% over the past decade.

Mylan has defended its actions with a 1997 letter from the Medicaid Drug Rebate program written to Dey Laboratories, which Mylan acquired in 2007. The letter noted that the EpiPen could be considered a “non-innovator” or generic product. Politicians have pushed back on this, saying that Mylan had plenty of time to review its regulatory status.

“The letter is more evidence that while Mylan irresponsibly raised the price of EpiPen, they were also bilking taxpayers out of millions of dollars,” Wyden and Rep. Frank Pallone (D-N.J.) said in a statement. “We will ensure that taxpayers get their due.”

Mylan’s shares dropped -10% to $42.64 apiece when the criticism began in August. Since then, shares have slowly but steadily declined. The stock was trading at $35.92 per share in mid-morning activity today, down -2.50%.