U.S. watchdog told Medicare, Medicaid that EpiPen was misclassified in 2009: senator

By Sarah N. Lynch

WASHINGTON (Reuters) - The internal watchdog at the U.S. Department of Health and Human Services warned the office tasked with administering federal health insurance programs that Mylan NV's EpiPen was improperly classified as a generic drug in 2009, Senator Charles Grassley said on Tuesday.

In a press release, Grassley's office said the HHS Inspector General confirmed in discussions with Senate aides that the watchdog office notified the Centers for Medicare and Medicaid Services about the problematic classification, which was highlighted in a report.

Mylan said last month it intends to pay $465 million to settle with the U.S. Justice Department over charges it misclassified the EpiPen as a generic instead of a branded drug, thereby underpaying rebates owed to state and federal Medicaid programs.

A Justice Department spokeswoman declined to comment to Reuters on the purported settlement, though a Senate aide said Grassley's office was previously told by the department that no deal with Mylan had been finalized.

A settlement will be the subject of a Nov. 30 hearing before the Senate Judiciary Committee, which Grassley chairs.

HHS Inspector General Daniel Levinson, as well as officials from the Justice Department, the Centers and Mylan have all been invited to testify.

The timing of the watchdog's disclosure to the Centers is significant.

It raises questions about why it has taken so long for Mylan to correct the error, how promptly the government told Mylan of its concerns, and, if Mylan knew of the problem, why it never told its investors.

U.S. securities regulators have since subpoenaed the company for its communications with the Centers.

“The taxpayers deserve answers on what happened between 2009 and now,” Grassley said in a statement. “It appears the EpiPen was misclassified for years, and CMS was notified of the problem. If no one did anything about the misclassification, why not?"

Representatives from Mylan did not respond to requests for comment.

A spokesman for the Centers for Medicare and Medicaid Services reiterated that "on multiple occasions," it advised Mylan about the proper classification of drugs and "expressly advised" Mylan about the EpiPen misclassification.

Mylan has come under fire in recent months for hiking the price of the lifesaving allergy treatment to more than $600 for a package of two in less than a decade.

Earlier this month, West Virginia's attorney general sent a letter to the Justice Department urging the government to reject the purported $465 million settlement, calling it "woefully deficient."

(Reporting by Sarah N. Lynch; Editing by Dan Grebler)

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