A powerful Senator is accusing the maker of EpiPen of overcharging the government by $1.27 billion
Senator Chuck Grassley (R-IA) says the Department of Health and Human Services (HSS) has calculated that the company may have overcharged the government by about $1.27 billion for EpiPens, a life saving anti-allergy medicine.
If Grassley and HHS are correct, that could mean a massive fine for Mylan - far more than the company expected.
Last year, Mylan came under fire for jacking up the price of two EpiPen injectors from $100 to $608 when it bought the drug in 2007. As a result, the company's CEO, Heather Bresch, who is also the daughter of West Virginia Senator Joe Manchin (D), was called to Capitol Hill to testify before Congress.
Grassley, as well as Senator Elizabeth Warren (D-MA) were especially displeased, and for good reason because there's a mystery here that has yet to be solved here.
Back in October, Mylan said that it had agreed to a $465 million settlement with the Department of Justice (DOJ) over this very matter - overcharging the government for EpiPen by misclassifying the drug. Under the terms of the settlement, 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.
Both Warren and Grassley made a lot of noise trying to get to the bottom of the matter. Grassley considered sending Mylan and the DOJ subpoenas to get them to talk about it, but that didn't happen.
Warren, in a letter to the Department of Justice, flagged issues with the deal, mostly that the settlement was smaller than it should be. 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.
At least.
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. Ultimately, the DOJ would never confirm that the settlement was actually reached.
Mylan has yet to confirm it to Business Insider. We've reached out and we'll let you know if/when we hear back.
If Grassley is right, then Mylan owes far more than even $530 million, and you can understand why the company would want to agree to the $465 million immediately.
But no so fast, we suppose.