Grassley Seeks Information from SEC on Whether Mylan Misled Investors on Settlement Announcement
Monday, Nov. 21, 2016
WASHINGTON – Sen. Chuck Grassley, Chairman of the Judiciary Committee, has asked the Securities and Exchange Commission to inform the Judiciary Committee on whether the commission is looking into whether Mylan misled investors in announcing a settlement on overcharging the taxpayers for EpiPens under Medicaid.
“If Mylan’s purpose of the press release was to increase stock prices at the risk of misleading investors, it is exactly this set of facts and circumstances that the SEC should monitor,” Grassley wrote to SEC Chair Mary Jo White. “Companies cannot be allowed to manipulate the markets and investors via press releases. Accordingly, since the SEC is already investigating Mylan, I request that you inform the Committee as to whether the SEC is looking into Mylan’s press release to determine if it was materially misleading.”
Grassley wrote that Mylan issued a press release Oct. 7 announcing the settlement with specific references to some of its alleged terms, but the Justice Department has maintained that there is no executed settlement and has been unwilling to confirm the alleged terms. The company also filed a document called an 8-K report describing the settlement and mentioning an SEC investigation over the Medicaid overcharges.
“This seems to contradict Mylan’s claim that all potential liability claims have been resolved. Mylan made no mention of the fact that they are under an SEC investigation in their press release,” Grassley wrote. “Given the dissonance between the press release, the 8-K filing, and the fact that no settlement agreement has been executed, Mylan should explain why it released such a strongly worded press release knowing that a finalized settlement did not yet exist and given the apparent SEC investigation. Further, it has now been over five weeks since Mylan’s press release and apparently a settlement has still not been executed.”
Grassley asked for a response by Nov. 29. Grassley is looking into the potential settlement between the Justice Department and Mylan over hundreds of millions of dollars of overcharges to the taxpayers under the Medicaid Drug Rebate Program and the role government agencies had in regard to holding Mylan accountable for the misclassification. Centers for Medicare and Medicaid Services officials were told in March 2009 that Mylan misclassified the EpiPen and was overcharging the taxpayers, yet the problem apparently persisted nonetheless. Grassley is seeking accountability for the problem to help make sure it does not recur.
Grassley’s letter to the SEC is available here.
Q&A: EpiPen Pricing With U.S. Senator Chuck Grassley
Q: Why are you looking into the pricing practices of an FDA-approved product known as an EpiPen?
A: Like so much of my oversight work, the issue of exorbitant price increases for a key medicine came to me from Iowans. They wanted answers about the high prices they were paying for their children’s medicine to treat severe allergic reactions. The widely known auto-injector is called an EpiPen and requires a prescription. It is used to inject a life-saving dose of epinephrine to counter an allergic reaction. Dozens of Iowa families contacted my office, writing letters to note the financial hardship that the price hike was creating to keep this life-saving device on hand for their kids. Since 2007, the drug manufacturer has increased the price for a two-pack dose from $100 to $600. Considering many families stock EpiPens at home, in the car and at school -- and in some cases for more than one child in the family -- the huge price increase is creating a big time hardship in household budgets. What’s more, this is a recurring expense for families considering the medication has a one-year shelf life. Families at the mercy of the pharmaceutical company’s pricing decision rightfully want answers. As one Iowan wrote in her letter: “I will pay whatever it takes” to keep her son protected against his severe peanut allergy. Once I started looking into the price increases, I discovered even more troubling issues linked to the drug manufacturer’s pricing strategy. Keep in mind that the taxpaying public pays for a lion’s share of pharmaceuticals prescribed and dispensed to millions of patients though the Medicaid and Medicare programs, as well as millions more of our nation’s veterans and members of the military. This raises a red flag as to how Mylan’s price structure affects taxpayers and consumers, the federal government, state governments and insurers.
The deeper I probed, even more troubling questions kept cropping up. It turns out that Mylan, the drug manufacturer, reportedly classified EpiPen as a generic under the Medicaid Drug Rebate Program, rather than as a brand name drug. That misclassification cost taxpayers hundreds of millions of dollars because it allowed for the EpiPen to qualify for a 13 percent rebate rather than a more generous 23.1 percent rebate under Medicaid. According to the Centers for Medicare and Medicaid Services (CMS), taxpayers spent $797 million on EpiPens through Medicaid from 2011 to 2015. Medicare spent $335 million in that time period. What’s most troubling in all of this is that the federal government was told in March 2009 – more than seven years ago – that the EpiPen was misclassified as a generic, rather than a brand name drug. And yet, no apparent action was taken and taxpayers paid hundreds of millions of dollars more because of it. The American people deserve to know why their government apparently failed to act sooner rather than later and what justification Mylan used to launch such a massive price increase on consumers. I’ll continue to work to get answers.
Q: What steps have you taken to achieve accountability and transparency in this matter?
A: For the last several months, I have ramped up bipartisan oversight efforts to get answers from the executive branch. In August, I wrote a bipartisan inquiry to CMS asking for more information regarding EpiPen’s classification as a generic drug, and specifically, the impact on the taxpaying public. Once it came to light that the misclassification has cost taxpayers hundreds of millions of dollars, I followed up with the Department of Health and Human Services (HHS) to find out how in the world the drug was misclassified in the first place, let alone since 2007. In addition, I’ve called upon Mylan to reimburse the Department of Defense (DoD) for millions of dollars the DoD overpaid in taxpayer funds for the drug, up to three times the discounted price the DoD receives for drugs dispensed at military facilities. It appears that for nearly a decade, the DoD overpaid for EpiPens at its retail pharmacies due to the misclassification, costing taxpayers upwards of $50 million. Now, it’s even more important to find out if Mylan knowingly misclassified EpiPen to avoid larger rebate payments at the expense of our military families and taxpayers.
In another bipartisan letter, I wrote to the Federal Trade Commission (FTC) regarding reports that Mylan engaged in possible anti-competitive business behavior, including exclusive contracts with schools, possibly precluding competition in the drug market. I received affirmation from the FTC that stopping anti-competitive behavior within the pharmaceutical industry is a top priority.
Let’s be clear that the pharmaceutical industry operates in a complex regulatory structure to protect patient safety. Policymakers also must work to ensure that companies aren’t engaging in anti-competitive practices in violation of the anti-trust laws or the regulatory process. In our system of free enterprise, profit drives job creation, wage growth, innovation and economic activity. Competition is the magic sauce that can create the next blockbuster drug as well as reduce drug prices. That’s why I conduct robust oversight to keep the playing field level to foster healthy economic growth and competition in the marketplace. No matter which sector of the economy, from pharmaceuticals to agriculture, it’s essential to keep competition fair and square and hold to account those who don’t play by the rules. It’s just as important to make sure the government faithfully enforces the law on behalf of the American people. With high drug prices on the minds of so many Americans, it’s imperative that we foster competition to keep prices down and quality and innovation up.
In addition to my tireless oversight work, I’m pushing legislative solutions that would push back against anti-competitive behavior to strengthen competition and hold down drug costs. The bipartisan bills I’m working on would help bring more generic drugs to market for consumer benefit. They are the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act and the Preserve Access to Affordable Generics Act.
EpiPens: Mylan declines to testify at oversight hearing, following poor lead of government agencies
Following the poor lead of the Department of Justice and the Centers for Medicare and Medicaid Services, EpiPen maker Mylan is declining to testify at a Judiciary Committee hearing scheduled for Nov. 30 on the potential settlement between Mylan and the Justice Department over reportedly hundreds of millions of dollars in overpayments by the taxpayers for EpiPens under Medicaid. Sen. Chuck Grassley, Chairman of the Judiciary Committee, made the following comment.
“The Obama Administration is dodging accountability for an expensive problem, and now a company is following its bad example. Taxpayers have paid and based on reports, continue to pay hundreds of millions of dollars more for the EpiPen than they have to pay. This happened because either the agencies in charge dropped the ball, the company gamed the system, or both. Ironically, the company was eager to talk about this problem a few weeks ago in a press release to investors but not before the United States Senate. It’s a shame government agencies and the company are ducking accountability under a voluntary process. One way or another, I intend to get answers for patients and taxpayers.”
Mylan’s letter is available here.
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