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EpiPen settlement proposal not enough, researchers say

The $465 million settlement proposed by Mylan, the manufacturer of the epinephrine autoinjector EpiPen, to resolve its misclassification of EpiPen as a generic drug for the Medicaid Drug Rebate Program, underestimates the actual cost of Mylan’s strategy, according to a recent research letter published in JAMA Internal Medicine.

A second research letter, also published in JAMA Internal Medicine, suggested that out-of-pocket costs for the EpiPen more than doubled among commercially insured patients.

“[The EpiPen] received considerable scrutiny in the past year because Mylan ... increased its list price to $609 even though the only ingredient, epinephrine, was discovered 100 years ago,” Jing Luo, MD, MPH, from the program on regulation, therapeutics, and law at Brigham and Women’s Hospital and Harvard Medical School, and colleagues wrote in their letter. “For brand-name drugs, the manufacturer pays a higher base rebate amount and an additional rebate connected to price increases above inflation.”

Mylan’s proposed settlement not enough

To help policymakers assess the value of the proposed settlement, the researchers estimated the amount of money Medicaid lost due to Mylan’s classification of EpiPen as a generic product using volume and expenditure data since 2007 from the Medicaid Drug Utilization database. They merged National Average Drug Acquisition Costs (NADAC) with Medicaid volume from the fourth quarter of 2012 to the first quarter of 2016 to calculate rebates under brand-name and generic scenarios for two EpiPen products: EpiPen 2-Pak and EpiPen 2-Pak Jr.

The results revealed that Mylan avoided paying Medicaid at least $426.1 million in rebates by classifying its product as generic. After 2007, EpiPen volume and expenditures per unit increased significantly. Luo and colleagues estimated that Mylan paid $112.2 million for the total generic rebate from the fourth quarter of 2012 to the first quarter of 2016. The total rebate amount if Mylan had correctly classified EpiPen 2-Pak and Epi-Pen 2-Pak Jr as brand-name products would have been at least $528.3 million: $199.3 million from the base rebate amount of 23.1% increased by NADAC and an extra $339 million due to price increases above inflation.

“The proposed $465 million settlement underestimates the actual cost of Mylan’s strategy, pointing to the limits of litigation as a way of recovering taxpayer funds,” Luo and colleagues wrote. “Despite these limitations, a better way to avert such profit-maximizing strategies would be to prevent manufacturers from classifying their own products as generic or branded for Medicaid rebate purposes.”

Healio Internal Medicine reports that Mylan declined comment on this story.

I ncreased out-of-pocket costs

In another research letter published at the same time, researchers found that Mylan’s aggressive pricing also played a significant role in doubling annual out-of-pocket spending for EpiPen among patients with commercial insurance.

“Since [obtaining the right to EpiPen in 2007], Mylan has increased the list price for EpiPen from $94 to $609. In part due to patient outcry over rising out-of-pocket spending, Mylan released a $300 generic EpiPen in December 2016,” Kao-Ping Chua, MD, PhD, and Rena M. Conti, PhD, from the department of public health science at the University of Chicago, wrote in JAMA Internal Medicine. “Whether generic EpiPen decreases out-of-pocket spending depends largely on insurers’ benefit design. To date, the generosity of EpiPen coverage has not been well-characterized.”

Researchers used the Truven MarketScan Commercial Claims and Encounters database, which includes data from individuals aged 0 to 64 years who received continuous private insurance from more than 100 employers throughout the U.S during the year. They calculated the annual rate of EpiPen prescription fills per patient and the annual EpiPen out-of-pocket spending by adding copays, coinsurance and deductible payments for each patient. Chua and Conti analyzed the percentage of EpiPen patients with a minimum of $100 and $250 in annual EpiPen out-of-pocket spending and the percentage of annual EpiPen total spending attributable to out-of-pocket spending.

Out of 191.2 million patients included in the sample during the study period, the annual rate of EpiPen prescription fills per patient rose from 1.18 to 1.2 (+1.6%) and annual EpiPen out-of-pocket spending per patient increased from $33.8 to $75.5 (+123.6%). The investigators found that children experienced higher levels of EpiPen out-of-pocket spending per patient compared with adults. Over time, deductible payments accounted for an increasing proportion of EpiPen out-of-pocket spending.

The researchers found that the percentage of EpiPen patients with at least $100 and $250 in annual out-of-pocket costs rose from 3.9% to 18% (+365.6%) and from 0.1% to 7.4% (+5,631.7%). Per patient, annual EpiPen total spending increased from $123.9 to $468.7 (+278.4%), whereas the percentage of this spending paid out-of-pocket decreased from 27.3% to 16.1% (–40.9%).

“While the aggressive pricing by Mylan was a main driver of increased EpiPen out-of-pocket spending, coverage policies also played a role,” Chua and Conti wrote. “Our findings highlight the need for patients, physicians and policymakers to advocate for both fair pricing by pharmaceutical manufacturers and adequate insurance coverage of life-saving medications.” – by Savannah Demko

Disclosure: Luo reports no relevant financial disclosures. Please see the full research letter for a list of all other authors’ relevant financial disclosures. Conti reports serving on the National Academy of Sciences, Engineering and Medicine Committee “Ensuring Patient Access to Affordable Drug Therapies.”