Warren: EpiPen® Medicaid rebate settlement shows ‘crime does pay’

Calling a purported settlement between the Department of Justice (DOJ) and Mylan Pharmaceuticals “shamefully weak” and “shockingly soft,” Sen. Elizabeth Warren (D-Mass) warned that the DOJ is failing to deter drug companies from engaging in schemes to defraud Medicaid. In a letter to Attorney General Loretta Lynch, Warren detailed her concerns about the settlement, and requested a full briefing from the DOJ on the matter. Warren’s letter echoed similar concerns raised by Sen. Richard Blumenthal (D-Conn), who asked the DOJ to reject the proposed settlement agreement.

Medicaid drug rebate program

The Medicaid drug rebate program, authorized by Sec. 1927 of the Social Security Act, requires drug manufacturers to participate in exchange for state Medicaid coverage of most drugs. Manufacturers pay a rebate on drugs for which payment was made under the state plan, and the rebates are shared between states and the federal government to offset the cost of Medicaid prescription drugs. The rebate for brand-name drugs is 23.1 percent of the average manufacturer price (AMP) per unit, adjusted for changes in drug costs that exceed the inflation rate; the rebate for generic drugs is 13 percent of AMP per unit, with no inflation adjustment. Manufacturers are responsible for ensuring that their drugs are correctly classified and for paying the correct rebate amount.

EpiPen classification

After cost increases in Mylan’s EpiPen® Auto-Injector came under scrutiny (see Mylan attempts to mitigate EpiPen® cost hike controversy, August 25, 2016), CMS Acting Administrator Andy Slavitt confirmed that since 1997, the EpiPen has been misclassified as a generic (non-innovator, multiple source) drug. Under CMS’ definitions, the EpiPen—approved under a New Drug Application (NDA) by the FDA, under patent protection, and with no therapeutic equivalents—should have been classified as a brand (single source) drug (see Federal EpiPen® spending up 43 percent, Mylan misclassified drug as generic, October 6, 2016). Further, Slavitt confirmed that CMS “expressly told Mylan that the product is incorrectly classified,” though the agency could not comment on the total amount of rebates owed by Mylan—which purchased the EpiPen from Merck in 2007—as a result of the misclassification.

Purported settlement

In October 2016, Mylan announced that it had settled allegations of fraud against the Medicaid drug rebate program related to the company’s classification of the EpiPen® Auto-Injector as a generic drug, rather than a brand drug; the DOJ, however, has not released any information about the alleged settlement (see Mylan settles EpiPen® Medicaid rebate dispute for $465M, October 11, 2016). According to Mylan, it will pay $465 million and enter into a corporate integrity agreement with the HHS Office of Inspector General (OIG), resolving all potential rebate liability claims by federal and state governments, and with no finding of wrongdoing.

Shame and shock 

In her letter, Warren wrote that there is no excuse for Mylan’s misclassification of the EpiPen, since the company “had multiple opportunities, over multiple years” to correct the classification. According to calculations done by Warren’s staff, Mylan should have paid an estimated rebate of $416 per dose, rather than the $58 per dose it paid; as a result, Warren says, Mylan underpaid Medicaid rebates by an estimated $530 million. The $465 million settlement, therefore, would reward Mylan by fining the company about $65 million less than the amount Mylan earned by its purportedly fraudulent classification of the EpiPen. Warren reminded the DOJ of “extensive tools” to hold the company accountable, including penalties of up to $100,000 per item of false classification under the Medicaid drug rebate law (42 U.S.C. §1396r-8(b)(3)(C)(ii)), treble damages under the False Claims Act (31 U.S.C. §3729(a)(1)), and criminal penalties under the Health Care Fraud law (18 U.S.C. §1347). She called the announced settlement terms a “limp response” that fails to hold Mylan accountable and with “no deterrent value to prevent drug companies from engaging in abusive schemes to defraud Medicaid and rip off taxpayers.”

Kusserow on Compliance: Self-disclosures to the OIG continue to result in settlements

The HHS Office of Inspector General (OIG) announced an update on self-disclosures reporting that settlements from that process have exceeded $500 million since the inception of the program in 1998. Health care providers, suppliers, or other individuals or entities subject to Civil Monetary Penalties are encouraged to use the OIG Provider Self-Disclosure Protocol, to voluntarily disclose self-discovered evidence of potential fraud. It gives providers the opportunity to avoid the costs and disruptions associated with a government-directed investigation and civil or administrative litigation.

Settlements are posted on the OIG Website that show amounts through this process most often range between a quarter and a half million dollars, with many under $100,000. However there are some significantly larger settlements in the millions of dollars. By far the large settlement came last year with Kroger Co., who agreed to pay $21,523,047 for (1) employment of 14 excluded individuals; and (2) filling prescriptions written by 84 excluded prescribers. It is also a reminder that the most common self disclosure involves parties on the OIG List of Excluded Individuals and Entities (LEIE). The lesson to be learned from this is to ensure ongoing screening of employees, health care professionals, contractors and vendors, as called for by the OIG. However, many times organizations that do screen frequently are not sufficiently trained to identify and confirm those that may appear on the LEIE. Sometimes this is as the result of slightly different spelling of names, transposition of first and surnames, etc. As such, it pays to train people in resolving potential hits, or use a service that will do it for you.

Guidance on the Provider Self-Disclosure Protocol can be found on the OIG website. The “principal purpose” of this program is making available “guidance to health care providers that decide voluntarily to disclose irregularities in their dealings with federal health care programs.” They accept on submissions relevant to the False Claims Act, the anti-kickback statute, and claims pertaining to excluded individuals. The OIG places emphasis on organizations to undergo a full internal investigation before disclosure submission and providing detailed findings to the OIG. Self-disclosure may be submitted online or by written submissions by mail to the OIG.

Disclosure Benefits

  1. No Corporate Integrity Agreement (CIA)
  2. Lower multiplier (1.5 times single damages)
  3. CMS suspending “the obligation to report overpayments” for those self disclosed
  4. Reduced the time a case is pending to less than 12 months.

The OIG leaves it to the provider to ensure the conduct in violation of federal criminal, civil, or administrative laws ended at the time of disclosure, or that corrective action is undertaken within 90 days of submission to the protocol. They must conduct a review to estimate the improper amount received from a federal healthcare program when reporting a submission of improper claims to the protocol. Damage estimation must be either a review of claims submitted or a random sample of affected claims (the random sample must be accompanied by a copy of the sampling plan). This is a critical step and must be done correctly by experts.

Meet Before Self Disclosing

  • Ensure reportable has ended before disclosure.
  • Corrective actions taken to correct underlying problem and prevent future non-compliance.
  • Waiver of any statute of limitations defenses pertaining to OIG administrative actions.
  • “Must acknowledge that the conduct is a potential violation” and “explicitly identify the laws that were potentially violated.”

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2016 Strategic Management Services, LLC. Published with permission.

Medicaid spending growth up as enrollment surge slows

National growth in Medicaid enrollment and total Medicaid spending slowed substantially in fiscal year (FY) 2016 and are projected to continue to slow, despite record increases in FY 2015. The decline occurs as the initial enrollment surge under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) coverage expansions tapers off and prices for high-cost and specialty drugs rise, according to the Kaiser Family Foundation’s annual 50-state Medicaid Budget Survey.

Medicaid spending on the rise

The survey projects an increase in state Medicaid spending growth in FY 2017 related to the requirement that Medicaid expansion states begin paying a five percent share of expansion costs on January 1, 2017. Before this date, the federal government committed to paying 100 percent of expansion costs. In expansion states, the median growth in Medicaid spending is estimated to be 5.9 percent in FY 2017, up from 1.9 percent in FY 2016. In non-expansion states, state Medicaid spending is projected to increase by 4 percent in FY 2017, compared to 3.9 percent in FY 2016. Thus, the differential in rates across expansion and non-expansion states is narrowing continually. As growth in overall state revenues slows or declines, pressure to control Medicaid spending increases.

Continued delivery system reforms 

The survey also found that the majority of states are refining their pharmacy programs to control costs and are adopting or expanding strategies to deal with the opioid crisis. States are increasing reliance on managed care, with at least 75 percent of Medicaid beneficiaries enrolled in risk-based managed care organizations (MCOs) in the majority of states that contract with MCOs. Additionally, 29 states are adopting or expanding delivery system reforms, such as patient-centered medical homes and accountable care organizations (ACOs). Nearly every state reported actions to expand the number of people served in community settings.

Kusserow on Compliance: HHS OIG celebrates 40 year anniversary

Office of Inspector General’s (OIG) mission is to protect the integrity of Department of Health & Human Services (HHS) programs as well as the health and welfare of program beneficiaries began 40 years ago with the passage of legislation in 1976. I had the honor of being the Inspector General for 12 of those years.   The OIG focuses on combating fraud, waste and abuse and to improving the efficiency of HHS programs. A majority of OIG’s resources goes toward the oversight of Medicare and Medicaid; however their responsibilities extends to many other programs, including the Centers for Disease Control and Prevention, National Institutes of Health, Food and Drug Administration, as well as numerous social programs for the disadvantage of the Country. The OIG posted a summary of their history and current efforts;

  • Inspector General Act signed into law by President Gerald Ford on October 15, 1976
  • Today, the OIG is charged with overseeing $1 trillion dollars in HHS spending, 25% of the outlays of the Federal government
  • OIG is the largest IG office five a staff of 1,660+ employees in 70 offices nationwide
  • OIG uses advanced data analytics to eliminate fraud, waste and abuse across the Nation
  • $20.6 Billion in estimated savings for FY 2015 from actions linked to them
  • OIG claims a return of $6 per $1 spent in addressing health care fraud
  • OIG reported in first half of this year expected recoveries of more than $2.77 billion, 428 criminal actions and 383 civil actions against individuals or entities

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

Connect with Richard Kusserow on Google+ or LinkedIn.

Subscribe to the Kusserow on Compliance Newsletter

Copyright © 2016 Strategic Management Services, LLC. Published with permission.