Report: Mylan may have overcharged US by $1.3B for EpiPen

Mylan (NSDQ:MYL) shares dipped slightly in mid-afternoon trading today after Sen. Chuck Grassley’s (R-Iowa) office released a Health and Human Services estimate claiming that taxpayers overpaid by as much as $1.27 billion for Mylan’s EpiPen device from 2006 to 2016.

The charges stem from Mylan’s decision to classify the emergency allergy auto-injector as a generic, instead of a branded product under the Medicaid Drug Rebate Program. Misclassifying the device allowed the company to pay the government a 13% rebate instead of a 23% rebate. The Centers for Medicare and Medicaid Services repeatedly warned Mylan that the device was wrongly classified, but the company didn’t take action.

The Medicaid Drug Rebate Program includes CMS, state agencies and participating drug manufacturers and it exists to offset the federal and state costs of prescription drugs dispensed to Medicaid patients. Nearly 600 drug manufacturers participate in the program, according to the federal government.

The program requires drugmakers to ink a national rebate agreement with the Dept. of Health and Human Services in exchange for state Medicaid coverage of the company’s drugs. Manufacturers are responsible for paying a rebate on drugs that are covered by the state and those rebates are determined based upon the type of drug – including whether it’s a branded drug or a generic drug.

Last fall, Mylan agreed to dish out $465 million to settle allegations that it underpaid Medicaid for the auto-injector. The company and the Dept. of Justice declined to attend a Senate hearing in November regarding the settlement, saying that it was a “pending matter”.

Canonsburg, Pa.-based Mylan 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.

Also today, reports revealed that major institutional investors are urging shareholders to vote down 6 members of Mylan’s board, including the chairman.