On December 4, 2018, Senators Ron Wyden of Oregon and Chuck Grassley of Iowa introduced new legislation aimed at cracking down on manufacturers who purposefully misclassify drugs to improve their reimbursement under Medicaid. The legislation, known as the Right Rebate Act of 2018, would close a loophole in Medicaid that has allowed this misclassification to happen.
When introducing the bill, the Senators used the EpiPen as a prime example under this scenario. “Misclassification of prescription drugs hurts millions of Americans whose lives depend on those medications, such as EpiPen, but can’t afford them due to unnecessarily exorbitant pricing,” Senator Grassley said. “This legislation is a significant step forward to fixing the problems in our health care system that have allowed pharmaceutical manufacturers to price gouge taxpayers and consumers for too long.”
The Right Rebate Act of 2018 would provide the Secretary of Health and Human Services with more authorities and tools to monitor drug manufacturers who participate in the Medicaid Drug Rebate Program (MDRP), including allowing the Secretary to mandate that drug manufacturers reclassify their drugs and imposing civil monetary penalties when drugs are knowingly misclassified. Currently, the Department of Health & Human Services (HHS) does not have the explicit authority to demand manufacturers reclassify their drugs or impose civil monetary penalties when caught with improper classification.
The legislation would give both the states and HHS the power to impose capped civil monetary penalties for misclassification in the Medicaid drug rebate program, and recouped rebates would be used “to improve drug data reporting systems and oversight of manufacturer compliance.” Additionally, HHS would be given the power to correct misclassification if a manufacturer does not correct the issue itself within a timely manner of being notified. The bill also requires that Congress receive a public report annually identifying misclassified drugs and the actions taken to correct each situation.
Senator Wyden called for quick action, noting that he hoped the bill would become law “by the end of the year.”
Did EpiPen Prompt This?
In 2016, Mylan settled with the Department of Justice (DOJ) for $465 million over the misclassification of EpiPen as a generic drug, when it was really a brand-name product. After an extensive investigation, the HHS Office of Inspector General (HHS-OIG) found that taxpayers may have overpaid for EpiPen by as much as $1.27 billion over a ten year period. Senator Grassley has been leading the charge and the Congressional investigation into the ongoing drug misclassification issue for Mylan and other drug manufacturers, and has pledged to continue his work as part of his drug pricing agenda as the incoming chair of the Senate Finance Committee. His partnership with Senator Wyden, who will continue to serve as Ranking Member, likely signals that the two Senate heavyweights expect to use their committee leadership in the 116th Congress to seek common ground on drug pricing.