MYL Mylan NV

WASHINGTON—The federal government says that Mylan NV has overcharged the federal-state Medicaid program by millions of dollars over five years for its emergency auto-injector product called the EpiPen.

In a letter Wednesday, Acting Administrator Andy Slavitt of the federal Centers for Medicare and Medicaid Services (CMS), said Mylan wrongly classified the emergency epinephrine product as a generic, when it should have been classified as a brand-name product. In doing so, Mr. Slavitt wrote, Mylan paid a smaller rebate of 13%, or about $163 million, when it should have been paying a rebate of 23.1% or more.

The letter from Mr. Slavitt to legislators who had inquired about the issue said the agency has "on multiple occasions provided guidance to the industry and Mylan on the proper classification of drugs and has expressly told Mylan that the product is incorrectly classified."

The letter from CMS said that from 2011 through and including 2015, total Medicaid spending before the rebate was $960 million. After the rebate, Mr. Slavitt said, the net Medicaid spending on the product was about $797 million. The agency didn't say exactly how large the alleged overcharge was.

EpiPen has recently been held up in congressional hearings and news reports as a poster child for excessive drug price increases, as Mylan has increased in price by more than sixfold since acquiring the product in 2007. Mylan Chief Executive Heather Bresch testified at a hearing last month of the House Committee on Oversight and Government Reform, which has been investigating the company's pricing practices.

Mylan said its product "meets the definition of 'non-innovator' drug in the Medicaid rebate law," and that it has been classified that way since before Mylan acquired the product. "Non-innovator" is another way of saying generic, as opposed to a brand product.

Mr. Slavitt's letter was released by Sen. Ron Wyden (D., Ore.) and Rep. Frank Pallone (D., N.J.), who are among the legislators who have been raising the issue of alleged misclassification.

The two legislators issued a statement Wednesday that "today's letter is more evidence that while Mylan irresponsibly raised the price of EpiPen, they were also bilking taxpayers out of millions of dollars."

"It is the manufacturer's responsibility to report accurate product and pricing data to the Medicaid Drug Rebate Program and pay proper rebate amounts," Mr. Slavitt wrote. He added that a manufacturer that doesn't accurately report "may be subject to liability under the False Claims Act, a penalty of up to $100,000 per item of false information" or other government action.

Write to Thomas M. Burton at tom.burton@wsj.com

(END) Dow Jones Newswires

October 05, 2016 20:45 ET (00:45 GMT)

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