Mylan is sued by consumers who claim PBM rebates are really kickbacks

DATE: April 3, 2017

Published by STAT News

Three consumers filed a lawsuit accusing Mylan Pharmaceuticals of paying kickbacks to pharmacy benefits managers in order to boost EpiPen sales, which caused them to unfairly overpay for the allergy-reaction device that has been at the center of the national debate over the high cost of medicines.

Their allegations take aim at the convoluted interplay between drug makers and pharmacy benefit managers, which are middlemen that negotiate favorable insurance coverage for medicines on behalf of insurers. The PBMs attempt to extract the best prices from drug makers and, for their trouble receive rebates, some of which are held back as fees.

The lawsuit, which charges Mylan engaged in racketeering, seeks class action status and claims that Mylan “gamed the system” and pretended to blame PBMs for demanding ever-higher rebates for its decisions to regularly raise the price for EpiPen.

The consumers maintain that Mylan paid continually higher rebates in order to book larger sales and ensure favorable insurance coverage, especially as competition to EpiPen arrived. The lawsuit, however, argued that the rising rebates “saddled” consumers who either did not have insurance or have high-deductible plans with “crushing out-of-pocket expenses.”

One of the women who brought the suit, Lisa Vogel of Takoma Park, Md., purchased EpiPen Jr. two-packs several times for her son, who is allergic to peanuts and amoxicillin, according to the lawsuit. Her family has a high-deductible plan from Aetna and, on June 13, 2014, her out-of-pocket cost was $351.73. A year later, on June 22, 2015, her share of the cost $453.49, the lawsuit stated.

The lawsuit also pointed to recent research in the Journal of the American Medical Association that found between January 2007 and December 2014, out-of-pocket spending for each EpiPen patient rose nearly 124 percent, to $75.50 from $33.80. “Mylan’s list price has become an artificial and phony price established and driven up as part of a kickback scheme from Mylan to the PBMs,” the lawsuit argued.

“Mylan is no victim,” the lawsuit continued. “Instead, Mylan participated in and benefited from the high list price scheme and from paying high rebates or kickbacks to PBMs to ensure EpiPen’s market dominance. In fact, from at least 2008 until 2011, when Mylan stopped reporting this information, EpiPen had a 95 percent market share” for auto-injector allergy devices.

There are no PBMs named as defendants. A Mylan spokeswoman declined to comment.

The lawsuit, which was filed in federal court in Seattle, comes several months after EpiPen pricing caused outrage among parents who were concerned about responding to a child’s serious allergic reaction. Over the past decade, the list price rose by 500 percent, to $608 for a two-pack, and some families began complaining vociferously last summer as the new school year began.

Unlike previous pricing controversies, though, the EpiPen to-do raised the role of PBMs and rebates. During testimony before Congress last fall, Mylan chief executive officer Heather Bresch attempted to explain that growing rebates meant that the company booked lower profits. This prompted Congress to ask Mylan for PBM contracts and related documents, although the company has been slow to respond and threatened with subpoenas.

Over the last few months, Mylan began selling a so-called authorized generic at about $300 and, meanwhile, a rival device called Auvi-Q, which had briefly competed with EpiPen before being withdrawn due to product defects, returned to the market.

By the way, the law firm that represents the consumers, Hagens Berman Sobol Shapiro, is the one of the same firms that filed a lawsuit two months ago against several drug makers — Eli Lilly, Sanofi and Novo Nordisk — for allegedly colluding to set prices for insulin. And in years past, the law firm also successfully brought lawsuits against many drug makers for inflating their average wholesale prices.