Exclusive: EpiPen price hikes add
millions to Pentagon costs
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[October 28, 2016]
By Caroline Humer and Ruthy Munoz
NEW YORK/WASHINGTON (Reuters) - Mylan NV's
price hikes on EpiPens have added millions to U.S. Department of Defense
spending since 2008 as the agency covered more prescriptions for the
lifesaving allergy shot at near retail prices, government data provided
to Reuters shows.
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."
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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.
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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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![](../images/102816pics/news_h15.jpg)
EpiPen auto-injection epinephrine pens manufactured by Mylan NV
pharmaceutical company for use by severe allergy sufferers are seen
in Washington, U.S. August 24, 2016. REUTERS/Jim Bourg/File Photo
![](../images/ads/current/richardson_lda_090916.png)
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.
![](http://archives.lincolndailynews.com/2016/Oct/28/images/ads/current/brickey_lda_061314.png)
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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