Mylan in Hot Water After Report Reveals Estimated EpiPen Overcharge

Taxpayers may have overpaid by as much as $1.27 billion

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Jun 01, 2017
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A report released on Wednesday revealed U.S. taxpayers may have overpaid drugmaker Mylan NV (MYL, Financial) by as much as $1.27 billion between 2006 and 2016 for its EpiPens.

Republican Sen. Charles Grassley, chairman of the Senate Judiciary Committee, released the report of the estimated EpiPen payments from the Department of Health and Human Services’ Office of Inspector General.

The amount is nearly three times the $465 million the company agreed to pay in its settlement with the Justice Department in October 2016 for classifying its EpiPen as a generic rather than specialty drug in order to pay a lower Medicaid rebate. According to the report, drugmakers pay a minimum rebate of 23.1% for branded drugs and a 13% rebate for generic drugs. Mylan agreed to pay a higher rebate beginning in 2017.

An additional hearing and investigation was launched by Grassley in November.

“The fact that the EpiPen overpayment is so much more than anyone discussed publicly should worry every taxpayer,” Grassley said in a statement."Mylan and the Obama administration reportedly were close to settling the overpayment for much less than $1.27 billion."

Grassley said the federal Centers for Medicare and Medicaid Services provided the committee with evidence that proved Mylan had been informed of the misclassification years ago but did nothing.

Mylan shares closed down 1%, or 38 cents, on Wednesday. With a market cap of $35.02 billion, the pharmaceutical company’s shares were trading around $38.98 before the market opened on Thursday with a price-earnings (P/E) ratio of 38.2, a price-book (P/B) ratio of 1.8 and a price-sales (P/S) ratio of 1.7.

The Vanguard Health Care Fund (Trades, Portfolio) is Mylan’s largest guru shareholder with 5.5% of outstanding shares. A total of 16 gurus own the stock.

Grassley vowed he would continue with his efforts to hold both the Medicaid Drug Rebate Program and Mylan accountable.

"Taxpayers have a right to know what happened here and to be repaid whatever they are owed," Grassley said.

In addition, the senator from Iowa said he is committed to advancing legislation that addresses high prescription drug prices and holding pharmaceutical companies accountable.

“As part of bringing down drug costs, we have to make sure companies that take part in federal health care programs are not gaming the system,” Grassley said.

A Mylan representative said the company is working with the government to finalize the settlement as quickly as possible.

Disclosure: I do not own any stocks mentioned in the article.