January 24,2019

Grassley, Wyden Release Bill to Crack Down on Big Pharma Games

After EpiPen-Maker Overcharged Taxpayers Hundreds of Millions of Dollars, Finance Leaders Offer Bipartisan Bill to Close the Door on Misclassification Loophole

WASHINGTON – Senate Finance Committee Chairman Chuck Grassley of Iowa and Senate Finance Committee Ranking Member Ron Wyden of Oregon today reintroduced the Right Rebate Act, which would close a loophole in Medicaid that has allowed pharmaceutical manufacturers to misclassify their drugs and overcharge taxpayers by billions of dollars and provide HHS with additional authorities to ensure drugs are properly classified.

“Drug manufacturers that make millions from government programs like Medicaid owe it to taxpayers to treat their hard-earned dollars with respect,” Grassley said. “Gaming the system by intentionally misclassifying drugs to reduce rebate obligations is nothing short of stealing taxpayer dollars and it’s inexcusable. This bipartisan bill fixes that problem and sends a clear signal to drugmakers that cheating taxpayers doesn’t pay and won’t be tolerated.”

“Every day, working families struggle to afford medicines like EpiPen while drug manufacturers work the system to profiteer off taxpayers,” Wyden said. “This bipartisan legislation will crack down on drug makers that deliberately try and rip off Medicaid and taxpayers by misclassifying their drugs. It marks an important first step in the work that lies ahead to lower prescription drug prices for families and hold drug makers accountable.”

First introduced by Grassley and Wyden at the end of last Congress, the Right Rebate Act would give the secretary of Health and Human Services more authorities and tools to monitor drug manufacturers who participate in the Medicaid Drug Rebate Program (MDRP) and would allow the secretary to require drug manufacturers to reclassify their drugs and impose civil monetary penalties when drugs are knowingly misclassified. The bill was included in the IMPROVE Act last year, which cleared the House of Representatives 400-11.

Grassley is a longtime advocate for lower prescription drug prices and has been a vocal critic of EpiPen’s exorbitantly high cost.

 

Iowans regularly contact Grassley by phone, email and at his annual 99 county meetings about the difficulties they faced paying for the anti-allergy EpiPen device. After conducting oversight of the issue in 2016 and 2017, Grassley learned that Mylan, EpiPen’s distributor, classified its popular anti-allergy medicine as a generic instead of as a brand name product in the MDRP. That incorrect classification allowed Mylan to pay smaller rebates to States and government programs, such as the MDRP. Grassley’s investigation also found that HHS and the HHS Inspector General did not have adequate authorities to properly oversee the MDRP and ensure drugs were properly classified. The costly practices were confirmed by the HHS Inspector General when it found – at Grassley’s request – that taxpayers may have overpaid for the EpiPen by as much as $1.27 billion over 10 years.  The Inspector General also found that additional drugs could be misclassified.   

 

Grassley continually pressed for the accurate classification of prescription drugs under the MDRP. He sought answers from CMS on whether it sought to recoup tax dollars overpaid for EpiPens from Mylan. He sent a follow-up letter after receiving no response from CMS, reiterating his initial request for information.

 

Grassley continued pressing for answers when news broke that EpiPen maker Mylan was in discussions with the Department of Justice (DOJ) to settle a False Claims Act case and repay the taxpayers for over-charging for EpiPen. Grassley sent a letter to then-President-elect Trump urging appropriate classification under the Medicaid Drug Rebate Program. That letter is available here. Grassley also sent a letter to the outgoing administration on the issue, which is available here. His Oct. 3 letter to the prior administration on the EpiPen misclassification is available here. When the DOJ and EpiPen-maker Mylan settled its case over the drug’s misclassification, Grassley issued a statement of disappointment, saying it shortchanged taxpayers.

 

On behalf of Iowans, Grassley also wrote to Iowa Attorney General Tom Miller seeking clarification regarding his office’s ability to determine the value of reimbursement to the state necessary to make Iowa whole from EpiPen’s apparent misclassification. A few months later, Grassley followed up with another letter seeking additional details and accompanying documentation regarding the state’s receiving $1.5 million as part of a DOJ settlement with Mylan.

 

In August of 2018, the U.S. Food and Drug Administration (FDA) approved the first generic version of the EpiPen. Grassley praised the move, saying that it was “great news for millions of Americans who depend on life-saving, anti-allergy devices.” Grassley believes getting more generics approved is one of the most important market-based strategies for lowering drug prices overall.

A one page summary of the bill can be found here. A section-by-section summary can be found here. The full legislative text of the bill can be found here.