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Agency Says It ‘Expressly Advised’ Mylan that the EpiPen Was Misclassified

September 29, 2016, 9:20 AM UTC
One analyst thinks Mylan's EpiPen price hike ties back to its executive incentive plans.
Photograph by Lucas Trieb — AFP/Getty Images

A U.S. federal health agency said on Wednesday it had “expressly advised” Mylan NV (MYL) that the drugmaker had improperly classified its EpiPen emergency allergy treatment in a way that allowed it to pay lower rebates to state health programs.

The disclosure comes as U.S. lawmakers and prosecutors are investigating Mylan over steep price hikes for the EpiPen device which have rendered the drug unaffordable for a growing number of families. A least one state has launched an investigation into whether Mylan failed to pay proper rebates to the Medicaid program for the poor.

The Centers for Medicare and Medicaid Services, or CMS, said in a statement it had “on multiple occasions, provided guidance to the industry and Mylan on the proper classification of drugs and has expressly advised Mylan that their classification of EpiPen for purposes of the Medicaid Drug Rebate program was incorrect.”

CMS, part of the U.S. Department of Health and Human Services, declined to say what action it took to push for the misclassification to be corrected or when it spoke to Mylan.

See also: Senators Want Justice Department to Investigate Mylan EpiPen Status

Mylan classified EpiPen with the Medicaid Drug Rebate Program as a generic treatment, which provides a rebate of 13% to state Medicaid programs, rather than as a branded drug, which pays a minimum rebate of 23.1%.

Mylan has said it complied with CMS rules. The company did not immediately respond to requests for comment on the CMS statement.

Mylan has been heavily criticized for sharply raising the price of EpiPen devices, which are carried by people with life-threatening allergies. Mylan acquired the product in 2007 and has raised the list price for a pair of EpiPens to $600 from about $100 in 2008.

Earlier on Wednesday, U.S. Senators Richard Blumenthal, Charles Grassley, and Amy Klobuchar asked the U.S. Department of Justice to investigate a possible misclassification.

“The facts … suggest that Mylan may have knowingly misclassified EpiPens, potentially in violation of the False Claims Act and other statutes,” the lawmakers said in a letter to Attorney General Loretta Lynch. The False Claims Act is used to pursue companies that defraud the federal government.