Pharmaceutical giant Mylan faced a storm of controversy and criticism in August, when it announced the price for its emergency epinephrine injector, EpiPen, would jump from around $100 to near $600 for a pack of two pens, an increase of 461 percent, which is very hard to understand. Consumers were outraged and dismayed, as there are no comparable alternatives in the marketplace, leaving them feeling left over a barrel. Congress is looking into this matter and hearings took place last month.
The move has also placed Mylan in the crosshairs for a number of legal actions. Legal experts believe the drug manufacturer may potentially be liable for claims on three fronts.
The most obvious problem with Mylan’s decision to increase the EpiPen price is its lack of competition, which leaves consumers with no choice but to pay whatever the company charges. Drug maker Sanofi-Aventis had a competing product, Auvi-Q, but it was recalled in October 2015. Amedra Pharmaceuticals does have a similar product, Adrenaclick, but it is not covered by many insurers.
Mylan also appears to have squashed efforts by Teva Pharmaceutical Industries Ltd. to bring a generic competitor to the marketplace. Mylan made a deal with Teva to hold off on its product launch, and then filed a citizen petition to delay Teva again. Teva’s product ended up being rejected by the U.S. Food and Drug Administration (FDA), but lawyers say the wheeling and dealing looks a lot like an illegal pay-for-delay scheme. Law360 reports Sen. Amy Klobuchar and Sen. Richard Blumenthal have asked the Federal Trade Commission (FTC) to investigate.
Additionally, in New York, Attorney General Eric T. Schneiderman is investigating similar antitrust claims surrounding Mylan’s “EpiPen4Schools” program. The deal allegedly would provide EpiPens to schools at a discounted rate, but only if they sign an agreement not to purchase a competitor’s product for a year.
Legal experts say states have a strong case against Mylan for violating consumer protection laws with price-gouging. They expect class action lawsuits to be filed in state courts.
This area of litigation also may play partner with politics, as legislators examine the issue of unjust enrichment and public harm versus capitalism – charging what the market will bear. Law360 notes that lawmakers will likely try to increase requirements for Big Pharma to demonstrate why it is charging a particular price. Mylan has faced criticism because it has not been able to list any market forces that would require such a price hike, such as increased manufacturing or research and development costs.
As has proven to be the case many times over, the False Claims Act (FCA) may provide the strongest weapon in this battle. We write about the FCA a lot in the Report, so regular readers will know that the FCA is used to prosecute those who attempt to defraud the government. This applies to government health care programs such as Medicaid.
Law360 reports that U.S. Senator Ron Wyden and Rep. Frank Pallone have asked the U.S. Department of Health and Human Services to investigate Mylan’s procedure for reimbursing the government under the Medicaid Drug Rebate program.
Companies are required to reimburse Medicaid 23.1 percent of the average manufacturer price minus the best price, which is the lowest price available to retailers. For generic or “non-innovator” drugs, the drugmaker would pay only 13 percent of the average manufacturer price.
The legislators note that Mylan is classifying the EpiPen as a generic drug when it determines how much the company must reimburse Medicaid and the Children’s Health Insurance Program. However, they tell Law360, while the drug epinephrine is an off-patent drug, the injector provided by Mylan to administer the drug is not. If the device applicator argument succeeds, the classification could affect other medications that are delivered through inhalers or injectors.
Mylan purchased the EpiPen from Merck KGaA in 2007, after it was already on the market. Mylan argued its classification of the EpiPen as a generic in a statement reported by Law360:
EpiPen has been classified as a non-innovator since long before Mylan acquired the product. Mylan’s classification of EpiPen as a non-innovator drug is consistent with longstanding written guidance from the federal government.
In an effort to address what has become a public relations as well as a legal minefield, Mylan has announced plans to expand its patient assistance program. The drug maker said it will provide a savings card to cover up to $300 of the copay, and will allow those who are up to 400 percent of the federal poverty level to get the EpiPen at no charge.
The company hasn’t garnered any sympathy, particularly in light of news that its top leaders – including CEO Heather Bresch – have enjoyed huge salary bumps during the same period that EpiPen’s price skyrocketed. From 2007 to 2015, Bresch’s total compensation increased by a whopping 671 percent, from $2,453,456 to $18,931,068.
While not on such an astounding scale, Mylan’s president Rajiv Malik saw his base pay increase by 11 percent, to $1 million annually as of 2015; and Mylan Chief Commercial Officer Anthony Mauro got a 13.6 percent bump to $625,000 per year. EpiPen accounts for approximately 40 percent of Mylan’s profits.
Sources: Law360, NBC News, USUncut.com and Bloomberg
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