DOJ hits pharmaceutical company with huge penalty for fraud

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A pharmaceutical company that tried to avoid paying rebates to Medicare by misclassifying EpiPen as a generic drug have not gotten off easy, as the Department of Justice just slapped them with a $465 million penalty in retaliation.

According to a press release posted on the DOJ website Thursday, Aug. 17, Mylan Inc. and Mylan Specialty L.P. have agreed to pay the $465 million fine in order to settle a claim that they intentionally misclassified their brand name drug, EpiPen, claiming it was a generic, to get out of paying rebates they owed to Medicare.

The Medicaid Drug Rebate Program was enacted by Congress to prevent “price-gouging” by drug manufacturers whose products were available only from a single source.

The Justice Department alleged that Mylan falsely reported EpiPen as a generic drug to Medicaid, allowing them to “demand massive price increases in the private market while avoiding its corresponding rebate obligations to Medicaid.”

“Between 2010 and 2016, Mylan increased the price of EpiPen by approximately 400 percent yet paid only a fixed 13 percent rebate to Medicaid during the same period.”

Below is the full press release from the Department of Justice.

FOR IMMEDIATE RELEASE

Thursday, August 17, 2017

Mylan Agrees to Pay $465 Million to Resolve False Claims Act Liability for Underpaying EpiPen Rebates

Pharmaceutical companies Mylan Inc. and Mylan Specialty L.P. have agreed to pay $465 million to resolve claims that they violated the False Claims Act by knowingly misclassifying EpiPen as a generic drug to avoid paying rebates owed primarily to Medicaid, the Justice Department announced today. Mylan Inc. and Mylan Specialty L.P. are both wholly owned subsidiaries of Mylan N.V., which is headquartered in Canonsburg, Pennsylvania.

“This settlement demonstrates the Department of Justice’s unwavering commitment to hold pharmaceutical companies accountable for schemes to overbill Medicaid, a taxpayer-funded program whose purpose is to help the poor and disabled,” said Acting Assistant Attorney General Chad A. Readler of the Department of Justice’s Civil Division. “Drug manufacturers must abide by their legal obligations to pay appropriate rebates to state Medicaid programs.”

“Mylan misclassified its brand name drug, EpiPen, to profit at the expense of the Medicaid program,” said Acting United States Attorney William D. Weinreb. “Taxpayers rightly expect companies like Mylan that receive payments from taxpayer-funded programs to scrupulously follow the rules. We will continue to protect the integrity of Medicaid and ensure a level playing field for pharmaceutical companies.”

Congress enacted the Medicaid Drug Rebate Program to ensure that state Medicaid programs were not susceptible to price gouging by manufacturers of drugs that were available from only a single source. It, therefore, subjected such single-source, or brand name drugs, to a higher rebate that is payable to Medicaid and that increases to the extent the price of the drug outpaces the rate of inflation. In contrast, generic drugs originating from multiple manufacturers are subject to lower rebates that, at least until recently, were not subject to inflationary adjustments.

The settlement resolves the government’s allegations that Mylan, by erroneously reporting EpiPen as a generic drug to Medicaid despite the absence of any therapeutically equivalent drugs, was able to demand massive price increases in the private market while avoiding its corresponding rebate obligations to Medicaid. Between 2010 and 2016, Mylan increased the price of EpiPen by approximately 400 percent yet paid only a fixed 13 percent rebate to Medicaid during the same period. The government further alleged that although Mylan was well-aware that its drug was not a generic, it nevertheless claimed generic status for EpiPen in the Medicaid program to avoid paying a higher rebate.

The settlement resolves allegations brought in a lawsuit filed under the whistleblower provisions of the False Claims Act, which permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery. The whistleblower in this case was the pharmaceutical manufacturer, Sanofi-Aventis US LLC. It will receive approximately $38.7 million as its share of the federal recovery.

Mylan has also entered into a corporate integrity agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG) that requires, among other things, an independent review organization to annually review multiple aspects of Mylan’s practices relating to the Medicaid drug rebate program.

“Our five-year corporate integrity agreement requires intensive outside scrutiny to assess whether Mylan is complying with the rules of the Medicaid drug rebate program,” said Gregory E. Demske, Chief Counsel to the Inspector General for the U.S. Department of Health and Human Services. “In addition, the CIA requires individual accountability by Mylan board members and executives.”

The government’s intervention in this matter illustrates the government’s emphasis on combating healthcare fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).

The investigation was conducted by the Justice Department’s Civil Division and the U.S. Attorney’s Office for the District of Massachusetts, in conjunction with various state attorneys general, the Department of Health and Human Services Office of Inspector General, and the Medicaid Fraud Control Units.

The case is captioned United States ex rel. Sanofi-Aventis US LLC v. Mylan Inc., et al., No. 16-CV-11572 (D. Mass.). The claims settled by this agreement are allegations only, and there has been no determination of liability.

CLICK HERE to read the full settlement agreement.

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