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 Pentagon spending rose to $57 million over the past year from $9
million in 2008 - an increase driven both by volume and by price
hikes that had a bigger bite on prescriptions filled at retail
pharmacies, according to the previously unreported data.
The Pentagon gets a government discount on EpiPens dispensed at
military treatment facilities and by mail order. But nearly half of
its spending was at retail pharmacies where it most recently paid an
average of $509 for EpiPen and $528 for EpiPen Jr two-packs - three
times higher than its discounted rate, the data shows.
That may change. Both the Pentagon and Mylan told Reuters that
discussions are underway that could extend the military discount to
EpiPens filled at retail pharmacies through the use of rebates.
Mylan spokeswoman Nina Devlin declined to comment on the specific
Department of Defense spending. She said in an emailed statement
that talks were underway to address "any questions or concerns from
the agency."
She declined to say if any repayment was on the table.
A Reuters analysis of the data estimated a difference of about $54
million between what the agency paid for EpiPens at retail
pharmacies from 2009 through 2016 and what it would have paid at
military clinics.
Mylan Chief Executive Officer Heather Bresch has drawn public
scrutiny for raising the U.S. list price on a pack of two injectors
nearly six-fold to $600 since 2008.
Affordability has become a bigger issue with the increased diagnosis
and awareness of food allergies. Families who rely on EpiPens to
safeguard their children against possibly fatal allergic reactions
often purchase several to carry with them, keep at school and with
caregivers.
In response to the criticism, Mylan is providing more families with
coupons to pay for EpiPens and plans to market a half-price version.
The drugmaker also agreed to pay $465 million to settle questions
over whether the Medicaid program for the poor overpaid because
EpiPens were classified as a generic treatment, a category that
allows manufacturers to give smaller rebates to government agencies.
While Medicaid providers don't take issue with the increased use of
EpiPens, they have bristled over the price hikes.
"The rate of increases in their cost is not justifiable," said Dr.
J. Mario Molina, chief executive of Molina Healthcare, which runs
Medicaid plans in California and 11 other states.
THE FULL PICTURE
The impact of Mylan's price hikes on government health programs,
such as Medicaid, has been obscured by highly complex pharmaceutical
pricing and opaque negotiations.
The Centers for Medicare and Medicaid Services, as well as several
large state Medicaid programs, have released partial details on
their spending, saying full information on rebates is confidential
under U.S. law. Without such details, it is impossible to discern
what price an agency is paying for EpiPen.
At Reuters' request, the Defense Department provided the most
comprehensive picture of EpiPen spending by a government agency,
including fiscal year expenditures since 2008, average price per
pack and the number of prescriptions filled by type of dispensing
location for all EpiPens obtained by military service members, their
families and retirees.
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The department's spending on EpiPens has increased fivefold since
2008, far outpacing the 130 percent growth in prescriptions, the
data shows.
Defense spending on the injectors at retail pharmacies - which
accounted for 53,500 of 226,000 EpiPen prescriptions for the last
fiscal year that ended Sept. 30 - has grown more than tenfold, to
$28 million from $2.4 million in 2008.
While EpiPen spending represents a fraction of a percent of the
Defense Department's $49 billion annual healthcare budget, the data
illustrates the premium it was paying for EpiPens at retail outlets.
"Lawmakers would not be terribly happy to hear that DoD is paying
more at retail," said Brian Bruen, a drug economics researcher at
George Washington University's Milken Institute School of Public
Health.
DISCOUNT BY DEFINITION
The Defense Department and Department of Veterans Affairs, typically
pay among the lowest drug prices in the country because of discounts
mandated by law, as well as rebates negotiated with drugmakers,
Bruen said.
Indeed, the Pentagon has paid $173 for an EpiPen two-pack filled
through mail order and $169 at military facilities in fiscal year
2016.
A key factor for government discounts is whether a drug is patent
protected and has market exclusivity, or it is a generic, made
cheaper by competition.
The EpiPen, which packages a generic allergy antidote in a patented,
easy-to-use injector, is somewhat of a hybrid.
For the Defense Department, pharmaceutical companies pay rebates on
brand name drugs dispensed by retail pharmacies, reducing the final
cost to the agency's discounted rate.
EpiPen's classification as a generic drug prevents it from receiving
mandated rebates. Mylan provided documentation it said showed the
military had accepted the generic classification for EpiPen in 2008.
Under Mylan's settlement with the federal government, Medicaid will
classify EpiPen as a branded drug, Devlin said. That will qualify
Medicaid for a 23 percent rebate, up from the 13 percent it gets on
generics. Any price hikes will be capped at the inflation rate, a
protection not afforded generic drug purchases.
"It was always our intention that the reclassification would benefit
all government agencies impacted by the classification, including
the VA and Tricare (Defense) programs," Devlin said.
(Additional reporting by Deena Beasley in Los Angeles; Editing by
Michele Gershberg and Lisa Girion)
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