Mylan NV has been overcharging the U.S. for years on its EpiPenallergy shot, a government agency said, as two lawmakers said thecompany was “bilking” taxpayers and may have made billions bymisclassifying the drug under complex Medicaid pricing rules.

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In a letter to a U.S. senator Wednesday, theCenters for Medicare and Medicaid Services, or CMS, said Mylan foryears overcharged the health program for the poor. Since 1997,EpiPen has been wrongly classified as a generic treatment, whichhas let Mylan pay lower discounts than the program requires forbrand-name drugs. Mylan, which acquired EpiPen in 2007, denies itacted improperly.

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The government has, in the past, “expressly told Mylan that theproduct is incorrectly classified,” CMS said in the letter, whichcame in response to an inquiry by Congress. “This incorrectclassification has financial consequences for the amount thatfederal and state governments spend because it reduces the amountof quarterly rebates Mylan owes for EpiPen.”

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The letter adds to Mylan’s mounting woes over the price ofEpiPen, which rose six-fold since 2007 to about $600 for a packageof two. Public outcry has sparked inquires from lawmakers and lawenforcement officials, and Chief Executive Officer Heather Breschwas harshly criticized by representatives at a Congressionalhearing last month.

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Mylan’s shares fell 2.1 percent to $37.22 at 10:37 a.m. in NewYork Thursday. They have slumped 24 percent since Aug. 19, beforethe furor over EpiPen’s price took off, and are trading at theirlowest levels since 2013.

‘Bilking taxpayers’

Two lawmakers, Senator Ron Wyden, an Oregon Democrat, andRepresentative Frank Pallone, a Democrat for New Jersey, had calledfor an investigation of Mylan’s adherence to the Medicaidrules.

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“Today’s letter is more evidence that while Mylan irresponsiblyraised the price of EpiPen, they were also bilking taxpayers out ofmillions of dollars,” Wyden and Pallone said in a statementresponding to the letter. “We will ensure taxpayers get theirdue.”

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Nina Devlin, a Mylan spokeswoman, said in an e-mail thatEpiPen’s classification as non-innovator “is consistent withlongstanding written guidance from the federal government.”

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Hundreds of millions of dollars in sales are at the center ofthe Medicaid dispute. From 2011 to 2015, the joint state-federalprogram for the poor spent about $797 million on EpiPens, CMSsaid in its letter. That included rebates of about 13percent, while the U.S. should have been getting a larger discountof at least 23.1 percent, according to the letter.

‘Premature to judge’

“It is a bit premature to judge if Mylan is guilty here,” RonnyGal, an analyst at Sanford C. Bernstein & Co. who rates thestock the equivalent of a buy, said in a note to clients. “Thecompany is in the hot seat and it is a bit convenient that CMSdecides after 19 years that Mylan has been wrong all along.”

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While the agency didn’t say exactly how much Mylan hadovercharged, the amount could be substantial. Companies arerequired to give Medicaid back any price increases they take onbrand drugs above the rate of inflation, in addition to thestandard discount. Because Mylan’s price increases have farexceeded inflation in recent years, if EpiPen were reclassified asa brand-name drug, it might have to discount most of the price toMedicaid.

1997 classification

The EpiPen has been classified as a non-innovator drug since1997, before Mylan acquired the product, company spokeswoman Devlinsaid.

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“Mylan simply continued to classify the product the same way ithad been classified before Mylan acquired the product,” Devlin saidin her e-mail.

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As public outrage over EpiPen’s price exploded in late August,Mylan responded by creating a saving card that would cover up to$300 of out-of-pocket costs for patients who need EpiPen. Under thelaw, though, the savings card cannot be used by patients in federalprograms like Medicaid.

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Mylan, which is run from Canonsburg, Pennsylvania, but has alegal address in the Netherlands, also said in late August that itwould introduce a generic version of EpiPen that it would sell for$300 for a two-pack. It has not yet introduced the generic, whichit now says will be out by the end of the year.

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Last month, three senators asked the Department of Justice toconsider investigating whether Mylan violated the law when itclassified EpiPen under Medicaid. In a Sept. 28 letter toAttorney General Loretta Lynch, Senator Richard Blumenthal, aConnecticut Democrat, Senator Charles Grassley, a Republican fromIowa, and Senator Amy Klobuchar, a Democrat from Minnesotasuggested that the company “may have knowingly misclassifiedEpiPens.”

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The Department of Justice said in a statement that it hasvarious criminal and civil remedies that it may pursue against acompany that defrauds federal health care programs such asMedicaid, including the civil False Claims Act, which imposestreble damages and penalties on any person who knowingly submitsfalse claims for federal funds. Nicole A. Navas, a DOJ spokeswoman,declined to comment specifically about Mylan.

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