
Mylan overcharged Medicaid for EpiPen for years, despite warnings - helloworld
https://www.statnews.com/pharmalot/2016/10/05/mylan-overcharged-medicaid-epipen/
======
gefh
The graph of epipen pricing over time at the bottom of the article is jaw
dropping. "Did we get in trouble yet? No? Add another 10% then". Only
imaginary books on Amazon have price curves like that.

~~~
fastball
Supply and demand?

~~~
JshWright
No, this is not an 'ideal' market. Mylan was able to exert significant control
over the demand by getting recommendations changed (you now need two EpiPens,
rather than one), and getting EpiPens required in many schools, etc.

~~~
hga
I can't imagine anyone recommending having less than two pens: what if one
fails due to a manufacturing flaw, user error (e.g. it would suck to fumble it
in the heat of action and drop it in an unacceptable location), etc.? And
isn't a second dose sometimes needed?

I don't _know_ the details, but I _do_ know my sister always carried two for
her eldest (past tense because he's now in college and presumably carrying
them himself now).

~~~
FireBeyond
And state legislation mandating that medic units carry multiple EpiPens.

Medic units, that have trained personnel, that have all the equipment to draw
up Epi from a $3 vial themselves, who are already on scene.

This leads to my county alone having to throw away $130,000/yr of EpiPens that
don't get used before they expire. Because the state legislates that we're
required to carry them.

~~~
JshWright
What state is that? We just carry epi...

------
refurb
This part is golden...

 _" The company is in the hot seat and it is a bit convenient that CMS decides
after 19 years that Mylan has been wrong all along while it did nothing about
it, just in time to suit Congress’ needs."_

This product has been classified as a non-innovator product for the last 19
years and CMS is just getting around to it? Sure.

And whenever someone says the US gov't doesn't negotiate down drug prices,
take a 2nd look at the Medicaid rebate. This is how those negotiations
went....

CMS: Oh that's your price? We're going to go ahead and give ourselves a 13%
discount (it's 23% for most drugs).

Drug company:....

~~~
newjersey
Is anyone required to sell to CMS? Why can't they just say we won't sell it to
you. Please go through our distributors.

~~~
refurb
CMS (Center for Medicare and Medicaid Services) is not a purchaser, they are
just a payer. For example, a pharmacy will fill your Rx, then go to CMS (if
you're on Medicaid) to ask them to pay it. Most drug companies use a
distributor, but that doesn't impact how they interact with CMS.

To answer your question if they are required to "sell" to CMS, the basic
answer is yes. In order to sell your drugs to Medicaid and Medicare patients,
CMS requires a "Pharmaceutical Pricing Agreement" (PPA) to be signed. One part
of that agreement is that you give a significant discount to CMS for certain
patients. This is why I chuckle when people say "Medicare can't negotiate drug
prices", which is true, but the gov't takes their pound of flesh other ways
(Medicaid rebate, 340B rebate, which both have price increase penalties).
There are examples of drugs where the manufacturer is required to sell them at
"penny pricing". That is, $0.01 per unit of drug. This is usually due to the
manufacturer cranking up the price really fast, but in the end they have to
give the drug to the gov't for _FREE_.

Do companies have to enter in to a PPA? They don't have to, but since Medicaid
and Medicare represent more than half of all patients in the US, you'd be
stupid not to. There is one example where a drug company said "no thanks". It
was J&J's over the counter division. I assume Medicare and Medicaid was a
super small slice for that business so they just pulled out all together. Most
companies can't afford to do that.

~~~
chimeracoder
> This is usually due to the manufacturer cranking up the price really fast,
> but in the end they have to give the drug to the gov't for FREE

To add to what you're saying, this same effect also results in inflated prices
for patients on private insurance and patients who are uninsured. When
Medicare reimburses less than the direct cost of goods and services (which
they _do_ , in the aggregate), then providers have to make up the difference
elsewhere.

That's why you see incredibly inflated bills for basic services. It's because
private insurers and uninsured patients are in effect subsidizing Medicare
through higher reimbursement rates, which get passed on to patients as higher
out-of-pocket bills or higher premiums.

~~~
snuxoll
You're also missing the frequent abuse of the ER by medicaid members, the
number of patients that go to the ER for a cold and waste everyone's time and
money is way too high.

------
EGreg
If you think that's nuts, you should look at Medicare Part D:

By the design of the program, the federal government is not permitted to
negotiate prices of drugs with the drug companies, as federal agencies do in
other programs. The Department of Veterans Affairs, which is allowed to
negotiate drug prices and establish a formulary, has been estimated to pay
between 40%[27] and 58%[28] less for drugs, on average, than Medicare Part D.

Although generic versions of [frequently prescribed to the elderly] drugs are
now available, plans offered by three of the five [exemplar Medicare Part D]
insurers currently exclude some or all of these drugs from their
formularies.…Further, prices for the generic versions are not substantially
lower than their brand-name equivalents. The lowest price for simvastatin
(generic Zocor) 20 mg is 706 percent more expensive than the VA price for
brand-name Zocor. The lowest price for sertraline HCl (generic Zoloft) is 47
percent more expensive than the VA price for brand-name Zoloft."

— Families USA 2007 "No Bargain: Medicare Drug Plans Deliver High Prices"
Estimating how much money could be saved if Medicare had been allowed to
negotiate drug prices, economist Dean Baker gives a "most conservative high-
cost scenario" of $332 billion between 2006 and 2013 (approximately $50
billion a year). Economist Joseph Stiglitz in his book entitled The Price of
Inequality estimated a "middle-cost scenario" of $563 billion in savings "for
the same budget window".[29]:48

Former Congressman Billy Tauzin, R–La., who steered the bill through the
House, retired soon after and took a $2 million a year job as president of
Pharmaceutical Research and Manufacturers of America (PhRMA), the main
industry lobbying group. Medicare boss Thomas Scully, who threatened to fire
Medicare Chief Actuary Richard Foster if he reported how much the bill would
actually cost, was negotiating for a new job as a pharmaceutical lobbyist as
the bill was working through Congress.[30][31] A total of 14 congressional
aides quit their jobs to work for the drug and medical lobbies immediately
after the bill's passage.[32]

(Wikipedia)

~~~
refurb
_By the design of the program, the federal government is not permitted to
negotiate prices of drugs with the drug companies_

Yes, but Medicare Part D is not run by the federal gov't, it's run by private
insurers (the gov't just pays them). Private Part D plans negotiate down the
cost of drugs all the time. In fact, the actual costs of Part D have
consistently come in lower than projected since the start of the program.

Private Part D plans get lump sum payments from the gov't to pay for patients.
Each Part D plan bids on being a provider. So, when the Part D plan negotiates
a lower price on a drug, they can bid lower for their overall plan and the
savings get passed onto the gov't.

And it's not fair to compare Medicare Part D prices to what the VA pays. The
VA is a pretty small slice of the market and there is statutory language about
the discounts they _must_ receive. A lot of it isn't even negotiated.

And finally, Medicare couldn't negotiate lower prices if it wanted to. Right
now, Medicare Part D has a hell of a time excluding a drug from their
formulary. They basically can't say "no, patients can't use this drug". If
they can't say no, then what leverage do they have over drug companies? The
rules on how Medicare can manage their formulary would have to change before
they could start negotiating.

~~~
hga
And don't forget that us Medicare Part D "customers" or whatever you want to
call us have more than a little skin in the game, especially the ones who'll
enter the "donut hole".

I'd add that the government "choosing a plan" web site is rather good, give it
a list of drugs and it'll tell you what you'll pay next year, modulo changes.
It's also not difficult to manipulate it to play what if games, e.g. every
once in a while I get a sinus infection, and it takes 30 days of a not so
cheap generic antibiotic to be sure to cure it. So I put that drug on and off
my list, to make sure it'll be acceptably priced if I have bad luck next year.
Displays quality survey data that seems to have some relation to reality,
makes enrolling in a new plan a snap, etc. etc.

------
drewm1980
Revoke the Epipen trademark immediately! They declared their own product to be
generic after all.

~~~
charlesdm
I believe they said the epinephrine in the pen is generic (i.e. non
trademarked), but the actual device (the pen) is.

~~~
AstralStorm
Which means it was misclassified, as Medicare patients are not paying for
Epinephrine, but for the pen.

------
martijn_himself
I'm torn on this subject, could someone explain to my why this is morally
wrong? (honest question, equally torn on the Shkreli case). I don't have any
knowledge of US medical policy, law and regulations but does the fault not lie
squarely with government here? Surely one can not expect a commercial
enterprise to price a product as 'fair' (whatever that means) when it is
operating in a competitive environment? (I wouldn't have the heart to run such
a company but isn't this to be expected?).

There are soccer players here in the UK that get paid £100k per week to do
nothing- noone is up in arms to regulate that market?

~~~
pikzen
Because I won't die if they're paying their players ten times market rates.
They're merely entertainers. That's private money, mostly. Making a public
service overpay by factors of almost 10 when it's quite literally a matter of
life and death is morally wrong, yes.

Putting themselves in almost a situation of monopoly on epipens in the US
(which you can't fault the high cost of entry for, I'm quite happy that
medical devices have high standards) then yes, they should have a moral
obligation to sell Epipens at a fair price.

~~~
chimeracoder
> paying their players ten times market rates

They're not paying their players ten times market rates. They're paying their
players 1x market rates. The market rate for those players happens to be very
high. That's the whole point.

~~~
cmdrfred
Exactly, the sports star/actor arugement is nonsensical. As far as I know the
NFL is very profitable. Those players create tons of value.

------
benmmurphy
it will be interesting to see how this is decided because apparently there is
a generic epipen: 'adrenaclick' but pharmacists are not allowed to substitute
the generic for epipen on a prescription. more details here:
[http://slatestarcodex.com/2016/08/29/reverse-voxsplaining-
dr...](http://slatestarcodex.com/2016/08/29/reverse-voxsplaining-drugs-vs-
chairs/)

~~~
maxerickson
Adrenaclick is an alternative _branded_ epinephrine auto-injector.

There's a couple of companies that make generic versions of it, so you can get
a pair for $150, but the branded version costs ~$400.

------
parennoob
I am sorry, but as someone who isn't from the US (but does live and work in
the US) ... phrases like this make zero sense:

> Mylan should have been paying a higher rebate of 23 percent, but did not do
> so because the company improperly classified EpiPen, despite being told its
> classification was incorrect.

If a regular person defaults on paying their taxes, the IRS can seize their
property and stuff. Why are Mylan's EpiPen warehouses not being seized to pay
for these rebates? Instead, they are being gently chided saying "you really
should have paid more, because um, _the law requires it_?"

In my opinion, due to massive lobbying, there are really one set of rules in
the US for regular people, and a different set for the ultra rich and large
corporations. I would be delighted to be offered a working alternative
explanation, or seeing massive financial and possibly criminal penalties for
Mylan executives (if willful misclassification is proven).

~~~
rayiner
That's not how it really works for regular people either. Virginia sent me a
letter last year stating "we think you were required to file a 2012 Virginia
return." Several months later they decide "we think you owe us X." No
Department of Revenue agents seizing my assets. A few months later I had my
CPA call, gave them my W2s showing I lived in New York at the time, and the
revenue agent was like "our bad, you didn't owe us anything after all."

The government really doesn't go full bore after "you should have checked Box
A instead of Box B" situations unless something really egregious happens, and
that's true for little people too. When there is a big corp, involved in
something like this, it's almost always true that there is ambiguity about
which Box should've been checked. All these things get the blessing of some
tax lawyer who doesn't want to go to jail.

Here there doesn't look like there has been an adjudication (a decision in a
lawsuit proving Mylan owes something). Until then, it's just some official's
statement.

~~~
parennoob
The IRS can garnish your wages without getting a judgement first. That is just
a fancy way of saying they can take your money without going to court. You'll
have to sue them if you think it's being done incorrectly, right?

Why can't the same be true of Mylan? "Garnish" their profits; and if it was
done wrongly, they can sue the relevant Government department.

I'm guessing there are issues of scale of bad behavior involved here, and
perhaps wage garnishing is really true only for "egregious" cases. My point is
that maybe large lobbying pharma companies making insane profit margins off
up-marked drugs ought to an egregious case too.

~~~
iopq
That's actually the IRS having special standing (which it shouldn't,
arguably). If it's a private contract, you'd have to go to court over breech
of contract and probably end up settling.

------
mhb
The World's Most Expensive Drugs:
[https://news.ycombinator.com/item?id=12654450](https://news.ycombinator.com/item?id=12654450)

------
M_Grey
I imagine that it's too much to hope that this could ever lead to criminal
charges?

~~~
iopq
Why would increasing the price of a good lead to criminal charges?

~~~
crazypyro
Because the lied to the government and misclassified the drug as a generic. By
doing this, they can give out half the discount as with brand name drugs.
Generics are discounted ~11% when sold to Medicaid, but brand name drugs are
often discounted 20-30%.

~~~
iopq
Then just fine them, why does this have to be a criminal issue? It should only
be a criminal issue when they did this knowingly and maliciously instead of
checking the wrong box somewhere.

~~~
M_Grey
You try checking a wrong box that nets you millions, and see how willing the
justice system is to take you at your good word.

~~~
iopq
They just fine you. People who get audited for millions oftentimes just pay a
fine.

------
mtgx
Reminder for this recent Harvard study:

[http://jamanetwork.com/journals/jama/article-
abstract/254569...](http://jamanetwork.com/journals/jama/article-
abstract/2545691)

Drug prices are high because of all the government-granted monopolies.

~~~
Angostura
It's really odd. The NHS in the UK does a reasonable job negotiating prices
down and recommending generics. It's been recommending an alternative to the
Epipen for a while now, I believe. So it shouldn't be _intrinsic_ to state-run
medical systems.

~~~
ceejayoz
It's definitely not intrinsic.

"[The] federal government is prohibited from negotiating drug prices on behalf
of Medicare Part D plans."

[http://www.politifact.com/wisconsin/statements/2012/sep/04/t...](http://www.politifact.com/wisconsin/statements/2012/sep/04/tammy-
baldwin/uncle-sam-barred-bargaining-medicare-drug-prices-s/)

It probably doesn't take much guessing to figure out which industry's
lobbyists helped that one along.

------
ianai
This means there are people who died who otherwise would not have. So weigh
the loss of everything those people would have contributed to society and the
economy over the increase in stock value.

------
ams6110
Doesn't say much for the ability of government run health care to control
costs.

~~~
GavinMcG
Given how hamstrung regulators are these days thanks to a pro-corporate
Congress, it doesn't say much other than that the government we've elected has
_chosen_ not to control costs.

~~~
colechristensen
Many people have strong support for a single payer system. Seeing this simple
failure illustrates a risk in moving that direction. Who do you trust to do a
better job keeping costs in control? The greed (or fiduciary duty) of an
insurance company or the governance of bureaucrats?

I trust the market more because the government has proved to be far more
corruptible. There should be a government option for sure, but regulations
should focus more on making the healthcare market healthy.

* Open straightforward pricing

* Removal of trademark protections for named drugs

* Reducing patent terms, adding affordability conditions

* Publicly funding research with open access requirements

* Mandating manufacture of unpopular or poorly competitive drugs to get patent protections

* Adding efficiency to approval and regulation process

It seems all too obvious that a single payer system in America would get
overrun with regulatory capture and skyrocket costs in sweetheart deals.

~~~
Frondo
"I trust the market more because the government has proved to be far more
corruptible."

Proved? Has the U.S. government actually been proven to be more corruptible
than private industry?

I realize you might have been using a bit of overly-strong language, and not
actually meant that in a literal way.

Still, frankly speaking, I trust the government a heck of a lot more than
private businesses like Comcast or the health insurers.

Your statement, all the same, leaves me wondering if somehow I've missed out
on some news stories or something, that shows how the government is corrupt
while BCBS or UnitedHealth act with integrity.

~~~
colechristensen
There's no way to say "proved" about anything but mathematics that meets with
it's usage in that context. It's not overly strong language, just used in a
different context therefore with different meaning.

I trust an insurance company and healthcare provider because they are
adversaries. Insurance vs insurance, insurance vs provider, provider vs
provider. They're being driven with competition and ultimately greed. If one
of them does a bad job, another that's doing better will replace it. They're
all playing with their own money.

A government bureaucrat tough doesn't really have any skin in the game. They
might be driven by good natured ideals, but I think that's far too vulnerable
to compromise. From politicians being bought by lobbyists to a revolving door
between industry and bureaucracies personal greed leads only to healthcare
providers and government colluding for their own individual benefits to the
detriment of the citizen who has no option but to pay taxes and get the
services of the single healthcare system.

In theory a benevolent dictator is the ideal form of government, but in
reality the people with power just aren't angels. You can use competition and
greed for the greater good if you do it properly, you just have to recognize
what you're doing and how to manipulate human behavior for the best outcome.

~~~
csydas
>I trust an insurance company and healthcare provider because they are
adversaries. Insurance vs insurance, insurance vs provider, provider vs
provider. They're being driven with competition and ultimately greed. If one
of them does a bad job, another that's doing better will replace it. They're
all playing with their own money.

I mean, alternatively, doesn't the ultimate utilization of what the market can
bear mean "no aggression pacts" between companies? As far as I've observed
change in local options and markets in recent years hasnt been from innovation
or disruptive new comers in many healthcare fields but instead buyouts and
mergers consolidating the power until you're left with giants that just sort
of leave one another alone. This doesn't breed competition, it breeds
complacaency and a market with extremely few choices.

I don't know the answer but this idea that corporations will fight for our
dollar doesn't sit well with me, as the current state of healthcare options
shows this to not be the case. The barrier of entry just on cost (equip,
doctors, medicine) excluding regulatory issues is prohibitive, and doubly so
for insurers. Disruptive forces that would provoke competition or a change in
pricing just seems too difficult to get off the ground.

~~~
colechristensen
There are plenty of markets where competition drives the margins to near zero.
I'm not saying medicine can or should be one of them, but something along that
trend is wholly possible.

The government _does_ have a role in this. They need to be there to foster the
healthy competition environment with appropriate legislation and regulation.
Part of that healthy regulation is punishing highly illegal "no aggression
pacts" and enforcing antitrust laws to prevent mergers that would suck out the
competition.

