Floor Remarks by Senator Chuck Grassley of Iowa
On EpiPen Misclassification Legislative Fix
Thursday, December 6, 2018
Mr. President:
Today, I’d like to raise an important issue that has impacted many families in Iowa and throughout the country: the high cost of prescription drugs.
One contributing factor that has played a part in how much money the government and taxpayer pays for some drugs is a government program called the Medicaid Drug Rebate Program.
On Tuesday, I introduced bipartisan legislation with Senator Wyden of Oregon. The bill, called the Right Rebate Act of 2018, would close a loophole in that program.
As a condition for participation in Medicaid, drug companies must pay a rebate, or discount, to the federal government and states for the drugs they offer.
Generally speaking, the rebate dollar amount is less for a generic drug than for a brand-name drug.
The rebate program simply hasn’t worked as designed. It turns out that some drug companies have been able to game the system to boost their bottom line at taxpayer expense.
Some drug companies have paid smaller rebates to the government. And that means taxpayers are footing a bigger burden.
There is one example in particular that highlights the main issues that we aim to solve with this legislation.
During the Obama administration, Iowans regularly contacted me by phone, email and at my annual 99 county meetings about the difficulties they faced paying for the EpiPen.
EpiPen is an emergency medicine used to treat severe, life-threatening allergic reactions. EpiPen is distributed by a company called Mylan.
In 2007, a pack of two EpiPens cost $100.
By 2016, the cost exploded to more than $600.
That is a substantial price increase. Many would argue that it’s an unjustified price increase. Especially considering the gut punch to taxpayers who foot the lion’s share of the Medicaid bill for families in need.
I listened to the concerns of my constituents and began to investigate how the drug rebate program was working.
In a nutshell, Mylan had classified the EpiPen as a generic drug in the Medicaid program when it should’ve been classified as a brand drug.
That means, Mylan misclassified EpiPen and the U.S. Department of Health and Human Services (HHS) let it happen.
Because of this incorrect classification, Mylan paid a much smaller rebate than they should have paid.
I asked the Health and Human Services Inspector General to look into these classification practices.
The Inspector General found that the taxpayers may have overpaid for the EpiPen by as much as $1.27 billion over 10 years because of the incorrect classification.
Eventually, Mylan settled a False Claims Act case with the Justice Department for $465 million.
Upon learning of that settlement, I expressed my disappointment that it didn’t seem the taxpayers had been made whole.
We shouldn’t have to depend on lawyers and lawsuits to get taxpayer money back.
This deception should never have happened in the first place.
Government agencies should, as an initial matter, be responsibly overseeing the programs that they are in charge of.
Because of insufficient attention to the problem by HHS, Mylan escaped accountability for a long time costing taxpayers billions of dollars.
But it’s not just Mylan and the EpiPen.
In a December 2017 report, the Inspector General found that 885 drugs may have been potentially misclassified.
Specifically, the Inspector General found that from 2012 to 2016, Medicaid may have lost $1.3 billion in rebates for 10 potentially-misclassified drugs with the highest total reimbursement.
So where do we go from here?
It’s clear the law must change to provide clarity. Let’s establish clear lines of authority to hold the government and the private sector accountable.
Taxpayers demand and deserve accountability.
Simply said, accountability will bring cost savings.
S. 3702, the Right Rebate Act, will shut down this loophole used by drug companies.
This legislation will prevent the misclassification of drugs in the first place and protect taxpayer dollars.
It does this by requiring HHS to enforce penalties on drug companies that knowingly misclassify drugs in the Medicaid program.
The legislation also provides remedies for States that are shortchanged by drug companies.
The legislation requires an annual report to Congress by HHS to make sure the agency is doing all that it can do to protect taxpayer dollars and keep drug expenditures down.
Mr. President, this is common sense legislation. It would close a loophole used by drug companies to keep prices artificially higher than they should be and it grants the Secretary of HHS the authorities to properly enforce the law.
The Right Rebate Act is only one step in the fight against high prescription drug costs. But, it’s the right step.
I look forward to working with Senator Wyden in the 116th Congress on many issues important to Americans, including the high cost of prescription drugs.
I yield the floor.
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