DOJ Says Mallinckrodt Owes Medicaid Hundreds of Millions in Rebates, but Is Silent About 340B Overcharges

DOJ Says Mallinckrodt Owes Medicaid Hundreds of Millions in Rebates, but Is Silent About 340B Overcharges

The U.S. Justice Department is suing drug manufacturer Mallinckrodt for allegedly underpaying “hundreds of millions of dollars” in Medicaid rebates on its immune disease treatment Acthar Gel—but it appears it isn’t seeking financial relief for 340B covered entities that presumably overpaid for Acthar due to the same alleged fraud.

“It’s hard to understand why the DOJ would exclude 340B overcharges from its lawsuit given the harm to federal taxpayers attributable to Medicaid and federal grant programs paying more for 340B drugs,” said 340B expert William von Oehsen, Principal in the Powers law firm. (Powers is a 340B Report sponsor).

DOJ announced March 3 it was intervening in a whistleblower suit against Mallinckrodt. The suit alleges Mallinckrodt illegally evaded paying additional Medicaid rebate amounts due when a drug’s average manufacturer price (AMP) rises faster than inflation. The same inflation penalty also can cause a drug’s 340B ceiling price to fall, sometimes to a floor of $0.01.

According to DOJ’s legal filing, Mallinckrodt raised Acthar’s price from about $50 per 5mL vial in 2001, the year its predecessor bought the drug, to nearly $40,000 per vial in 2019. Because Acthar predates the Medicaid Drug Rebate Program’s creation in 1990, DOJ says Mallinckrodt should have paid Medicaid rebates and associated inflation penalties pegged to Acthar’s AMP in 1990. The company, however, has been paying rebates pegged to Acthar’s much higher 2013 AMP, under the rationale that the drug was approved in 2010 to treat an additional condition. By resetting Acthar’s base AMP to the higher 2013 level, Mallinckrodt erased the effects of all pre-2013 price increases on the Medicaid rebate inflation penalty. “Mallinckrodt has avoided hundreds of millions of dollars in rebates in this manner,” DOJ says.

We’ve asked DOJ why it is not going after Mallinckrodt for presumably overcharging 340B entities for Acthar. DOJ’s record on going to bat for 340B entities in Medicaid rebate False Claims Act lawsuits is spotty. The last time it did so was in 2017, when it reached a settlement with Mylan over claims that the company falsely misclassified its allergic reaction emergency autoinjector EpiPen as a generic rather than brand drug, both to avoid paying higher Medicaid rebates and to avoid paying lower 340B ceiling prices. 340B entities received $19.3 million as part of the overall $465 million settlement.

It is not clear what avenues for relief might be open to 340B entities that think they were overcharged for Acthar. The U.S. Supreme Court ruled in 2011 that 340B entities lack the right to sue on their own behalf to enforce the 340B pricing agreement manufacturers sign with the federal government. If the government reaches a settlement with Mallinckrodt, the agreement might release the company from any civil or monetary claims arising from its conduct, including claims under the 340B statute. We will continue to track developments with this suit and its implications for 340B stakeholders.

Update: COVID-19 Emergency Bills Would Relax Medicare Telehealth Restrictions

COVID-19 emergency spending legislation on the fast track in Congress (the House passed it yesterday) would let the Health and Human Services Department (HHS) waive Medicare telehealth restrictions during the emergency so “Medicare beneficiaries can receive the care they need at home to avoid placing themselves at greater risk of this virus.”

There is no black and white answer to the question, “Do telehealth encounters count under the 340B patient definition?” The Health Resources and Services Administration’s (HRSA) proposed, but never finalized, 340B omnibus guidance in 2015 would have clarified that under the 340B patient definition, “The use of telemedicine involving the issuance of a prescription by a covered entity provider is permitted, as long as the practice is authorized under State or Federal law and the drug purchase otherwise complies with the 340B Program.” Recent searches of the 340B Prime Vendor program’s 340B FAQs found no results for the terms “telemedicine” or “telehealth.”

The two coronavirus-response bills also include between $500 million (House) and $300 million (Senate) for the purchase of vaccines, therapeutics, and diagnostics; $100 million for community health centers; and $10 million for hospital employee and first responder training, according to House and Senate summaries of the legislation. Modern Healthcare (subscription required) notes that “lawmakers decided to leave hospital reimbursement for their response to the COVID-19 outbreak to federal agencies and states.”

JAMA Study: Brand-Drug Net Prices Rose 3.5 Times Faster Than Inflation From 2007 to 2018

Brand-drug trade association Pharmaceutical Research and Manufacturers of America (PhRMA) has spent millions of dollars on advertising recently, some aimed at shifting attention away from its members and instead toward the “long line of middlemen collecting a significant portion of what gets paid for medicine,” including 340B hospitals. In January it released a study finding that 46 percent of “the sum of payments for brand medicines made by patients and their health plans at the point of sale” went to hospitals, insurers, pharmacy benefit managers, the government, and others.

Recently, the Center for Pharmaceutical Policy and Prescribing at the University of Pittsburgh Health Policy Institute set out to learn the extent to which rebates and discounts offset hikes in brand-drug list prices. It published its findings in JAMA this week. It found that net prices—list prices minus “all concessions made by manufacturers, including rebates, coupon cards, 340B discounts, prompt pay discounts, return provisions, and any other deductions accounted for in the reporting of sales”—for 602 brand drugs studied increased by 60 percent between 2007 and 2018. As Pharmalot blogger Ed Silverman pointed out, that “was 3.5 times the inflation rate” for the 11-year study period.

“The findings are akin to pulling the curtain back on an argument the pharmaceutical industry has long used to deflect criticism over its pricing,” Silverman wrote. PhRMA wrote back, saying the study “fails to account for the built-in cost containment that characterizes the prescription medicine life cycle.”

Apotex Recalculates 1Q 2020 340B Ceiling Prices for Two Products

Canada-based drug maker Apotex recently announced on the HRSA Office of Pharmacy Affairs (OPA) website that it has recalculated 340B ceiling prices for the first quarter of 2020 on two NDCs:

  • 60505-6098-01 TIGECYCLINE PINJ 50MG 50
  • 60505-6076-04 AZITHROMYCIN LYO 500MG 100

The company doesn’t say, though, whether the new ceiling prices are higher or lower than before, and if they are lower, whether it is providing refunds for overcharges. The notice says only that the company “is not seeking reimbursement or repayment where the Covered Entities paid a lower price than the recalculated 1Q2020 340B ceiling price.” We’ve reached out to Apotex for a clarification.

Tweets of Note

@340BHealth: @UVMMedCenter uses #340B savings to offer a drug assistance program that is helping patients with chronic conditions afford the medications they need. Learn more in our newest #Facesof340B profile. #Protect340B

@CV340B: ACTION ALERT: Writing a letter to the editor is a highly effective way to let your community know how important #340B is to you. Not sure what to write? Use our template as your guide.

@AIR340B: #340B serves a critical role for low-income patients, but for some patients, the program’s unchecked growth is hurting their access to care. Click through #APatientsJourney here to see why improvements to #340B are needed:

@340BHealth: “If the federal #340B program was ever eliminated, virtually every not-for-profit hospital in West Virginia would have annual operating loses,” writes Mountain Health Network CEO Mike Mullins.  #Protect340B @CHHnews @StMarysMed

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