December 7, 2021

Volume XI, Number 341

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December 06, 2021

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The Department of Justice Needs Individuals to Report Drug Pricing Fraud for False Claim Act Enforcement

One available use of the False Claims Act is to stop pharmaceutical manufacturers and pharmacy benefits managers (PBMs) from artificially inflating drug prices.  Skyrocketing drug prices directly caused by schemes concocted by major players in the health care space are invariably passed along to federal health care programs such as Medicare, Medicaid, TRICARE for military families, the VA and the federal employees health benefits (FEHB) programs.  In the end, the taxpayer is victimized, and the very health care programs designed to help the average American are in jeopardy.

One such scheme to artificially inflate drug prices involves kickbacks paid to PBMs by pharma companies.  Distributors of EpiPen products brought antitrust claims on behalf of itself and a proposed class of distributors.   Although these are antitrust claims, these same claims could be brought under the False Claims Act.

Epinephrine in the form of an EpiPen manufactured by Mylan is a costly drug used for the emergency treatment of severe allergic reactions.  EpiPen combats anaphylaxis, a sudden and severe allergic reaction that occurs within minutes of exposure to an allergen.  Epinephrine is often a life-saving medication.  Normally, individuals (including children) who are prescribed the EpiPen need to keep it with them at all times.

The complaint filed in the United States District Court for the District of Minnesota accuses Mylan of paying higher Medicaid rebates to certain pharmacy benefits managers in exchange for kickbacks in the form of advantageous placement on drug formularies.  It virtually guarantees that PBM middlemen will look the other way when Mylan’s drug prices soar.  The PBMs include CVS Caremark, Express Scripts, and OptumRx.  Mylan’s skyrocketing prices for EpiPen, the suit alleges, went hand-in-hand with its monopoly share of the market.  And Mylan is aware that it has patients over a barrel because the very life-saving nature of the drug is leads them to have no choice but to pay for the drugs at any price.

In January, the district court denied a motion to dismiss the proposed class complaint.  The alleged scheme involves a mutual back-scratching by Mylan and the PBMs.  According to a ruling by the court on the motion to dismiss, Mylan knowingly received the benefit of charging more for its drug products.  The PBMs gained something, too, because they received more and more rebates as the cost of the EpiPen increased.  Of course, rather than pass on these cost savings to the clients of the PBMs, they manipulated the system for their own mutual financial purpose.

When pharmaceutical companies and PBMs conspire to fraudulently inflate drug prices of important medications like the EpiPen, it has ripple effects.  As shown by this lawsuit, everyone pays the price when the major players in the pharmaceutical industry put financial greed ahead of patient care and safety.  Soaring drug costs harm Medicare and Medicaid recipients, as well as the taxpayers.

Mylan and its EpiPen are repeat players in lawsuits.  Back in 2017, Mylan paid the United States $465 Million under the False Claims Act for allegedly knowingly avoiding its obligation to pay rebates to the Medicaid program.  As part of that lawsuit, Mylan was required to enter a 5-year corporate integrity agreement (CIA) to make sure that it did not commit the same fraud again.

To hold the industry accountable, the Department of Justice needs whistleblowers to report this type of pricing fraud. 

© 2021 by Tycko & Zavareei LLPNational Law Review, Volume XI, Number 22
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About this Author

Eva Gunasekera WHistleblower and Government Fraud  Attorney Tycko & Zavareei LLP Law Firm
Partner

FORMER DOJ SENIOR COUNSEL FOR HEALTH CARE FRAUD, NOW REPRESENTING WHISTLEBLOWERS

(202) 973-0900
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