What Makes Mylan’s Newest EpiPen Lawsuit Different?

What Makes Mylan’s Newest EpiPen Lawsuit Different?

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by: Shanthi Rexaline, Benzinga Staff Writer

 

Mylan N.V. MYL, which has faced a plethora of lawsuits in the past over its EpiPen, is now being saddled with another lawsuit, although this time around the parties involved go beyond the company and the plaintiffs.

 

EpiPen And Its Legal Tussle

EpiPen, or an epinephrine auto injector is a medical device which is used to inject a measured dose of epinephrine through autoinjector technology. Epinephrine is used to treat anaphylaxis. Anaphylaxis is an allergic reaction that occurs quickly and can prove lethal.

Mylan has been mired in a controversy over price gouging — a term used to refer to the practice of raising the prices of goods, services or commodities to an unreasonable or unfair level.

Accusations have been leveled against the company for boosting EpiPen prices by over 500 percent since 2007, with the price for a two-pack up to $608.61 from $93.88 in 2007. The company is facing several class-action lawsuits initiated against it in several federal courts.

In order to quell concerns, the company brought out a generic version of its EpiPen, priced at $300.

In October 2016, the company reached a settlement with the Justice Department for improperly classifying it as a generic drug and in the process overcharging Medicaid. The settlement amount was $465 million.

 

PBMs Brought Into The Net

The latest lawsuit filed concerning EpiPen also involves the Pharmacy Benefit Managers. The class action lawsuit filed in a Washington state district court by three people claims that the company artificially inflated EpiPen prices.

What is new about the lawsuit is that it takes a potshot at the company, making use of the same defense it offered for shifting the blame of price gouging. Mylan's CEO Heather Bresch had earlier suggested that the price increases were due to the middlemen and the complicated world of pharmaceutical pricing. A fair enough argument at the outset.

However, the plaintiffs in the recent lawsuit allege that the company used the Pharmacy Benefit Managers, or PBMs, who act as an intermediary between the payer and everyone else in the healthcare system.

The lawsuit also brought up an argument that the company is guilty under the Racketeer Influenced and Corrupt Organization Act, or RICO. This federal law incriminates people involved in racketeering activity performed as part of an ongoing criminal enterprise such as illegal gambling, bribery, kidnapping, murder, money laundering, counterfeiting, embezzlement, drug trafficking, slavery and a host of other unsavory business practices.

"Mylan is no victim," Steve Berman, managing partner at Hagens Berman, which represents the case, said in a news release. "Mylan has tried to pass the buck and excuse itself from any responsibility, attempting to wash its hands of the dubious scheme that has plagued allergy sufferers with unbearably high prices."

 

The Mechanism Of Racketeering

Explaining the role of the PBMs, the lawsuit states that the negotiate prices with drug manufacturers on behalf of health plans. As compensation for the negotiation, PBMs get a percentage of the difference between the list price and the undisclosed real price, called the spread.

The larger the spread, the higher the PBMs' profits and the higher likelihood PBMs will choose a certain drug company's product to receive a favorable formulary position, and be prescribed more often, the lawsuit said.

CVS Health Corp CVSExpress Scripts Holding Company ESRX and OptumRx controls over 80 percent of the PBM market.

The lawsuit also outlined how Mylan was able to sideline competition, which had their own version of EpiPen. Adrenaclick, whose list price was one-third that of EpiPen's and Auvi-Q were all forced out of the market, given that the PBMs did not place them on formularies. Formulary is a list of prescription drugs covered by a prescription drug plan or another insurance plan offering prescription drug benefits.

The price gouging issue has taken an altogether different dimension, with the PBMs now being brought into the picture. The lawsuit and its outcome could have far-reaching implication for drug pricing and the stakeholders involved. All eyes are trained on this landmark lawsuit as multiple parties fight it out to prove their point.

 

Image Credit: By Intropin (Own work) [CC BY 3.0 (http://creativecommons.org/licenses/by/3.0)], via Wikimedia Commons

© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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