By David McLaughlin and Jared S. Hopkins, Bloomberg News
Mylan NV and the U.S. Justice Department finalized a $465 million settlement to resolve claims that the drugmaker defrauded taxpayers by misclassifying its allergy-shot EpiPen product as a generic drug.
The settlement, announced by the Justice Department Thursday, resolves claims that Mylan was able to improperly avoid paying rebates owed to the government by classifying EpiPen as generic even though the company marketed it as a brand-name medicine. The drugmaker disclosed an agreement last year but government officials wouldn’t confirm it until now.
U.S. lawmakers have said the settlement wasn’t tough enough. That criticism continued Thursday. Democratic Senator Richard Blumenthal of Connecticut called the agreement a “feeble fraction” of the $1.27 billion that a government report found taxpayers may have overpaid for EpiPen over the last decade.
“Quite simply, the Department of Justice is letting this deceptive pharmaceutical behemoth off the hook,” Blumenthal said in a statement. “Absolving Mylan from a finding of wrongdoing has cleared the way for the company to pocket the money it embezzled from an American public in desperate need of lifesaving and affordable medications.”
Republican Senator Chuck Grassley of Iowa echoed those complaints, saying the agreement shortchanged taxpayers and asked how the Justice Department arrived at $465 million.
“The settlement is a disappointment,” Grassley said in a statement. “The agencies that are supposed to look out for taxpayers should not be pulling their punches. A company got away with overcharging the taxpayers for a long time.”
The criticism signals that Mylan has yet to move past the outcry last year over the rising price of EpiPen, a major profit driver for the company. After acquiring the rights to the shot in 2007, Mylan increased the price by about sixfold, sparking complaints about price-gouging.
Mylan shares closed up less than 1 percent to $30.56 in New York.
By misclassifying EpiPen as a generic rather than a brand- name product, Mylan profited at the expense of Medicaid, the government’s health-insurance program for the poor, according to the Justice Department. Mylan said it will reclassify the EpiPen for reimbursement purposes and pay the rebate applicable to brand-name products effective April 1.
“Taxpayers rightly expect companies like Mylan that receive payments from taxpayer-funded programs to scrupulously follow the rules,” said William Weinreb, the acting U.S. Attorney in Massachusetts.
A spokeswoman for Weinreb’s office didn’t respond to a request for comment about the criticism from lawmakers.
Medicaid gets a 23 percent discount on brand-name drugs and a 13 percent discount on generics. EpiPen had been classified incorrectly as a generic since at least 1997, both by Mylan and previous makers of the life-saving medicine, according to the Centers for Medicare and Medicaid Service.
“As we said when we announced the settlement last year, bringing closure to this matter is the right course of action for Mylan and our stakeholders to allow us to move forward,” Chief Executive Officer Heather Bresch said in a statement.
Rival pharmaceutical company Sanofi went to the Justice Department in 2014 about Mylan’s conduct. At the time, Sanofi was selling a competing auto-injector and was reporting it to Medicaid as a brand-name drug, the government said.
Last year, Sanofi sued Mylan under the False Claims Act. As a result of Mylan’s settlement, Sanofi will receive $38.7 million as its share of the federal recovery, plus a share of what states recover, the Justice Department said.
“It was our contention that Mylan’s intentional misclassification of EpiPen allowed them to amass hundreds of millions of dollars which they then used to finance their anticompetitive behavior in the marketplace,” Sanofi said in a statement Thursday.
The settlement resolves all potential Medicaid rebate liability claims by the federal government, as well as potential claims by some hospitals and other entities, Mylan said. The settlement also funds Medicaid programs in all states and creates a framework for resolving reimbursement claims. The settlement does not contain an admission or finding of wrongdoing.
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