EpiPen maker to pay $30 million to SEC for disclosure and accounting failure

National

CLARKSBURG, W.Va. (WSPA) – Mylan will be paying $30 million to settle charges from the Security and Exchange Commission (SEC) related to the Department of Justice probe into whether the pharmaceutical company overcharged Medicaid by hundreds of million of dollars for EpiPen. This announcement came in a release from the SEC.

The EpiPen is Mylan’s largest revenue and profit generating product, according to the release.

The release stated that according to the SEC’s complaint, Mylan classified EpiPen as a generic drug under the Medicaid Drug Rebate Program, which resulted in Mylan paying much lower rebates to the government than if EpiPen had been classified as a branded drug. The complaint alleges that in October 2014, the Centers for Medicare and Medicaid Services (CMS) informed Mylan that EpiPen was misclassified as a generic drug.

The DOJ conducted a nearly two-year-long civil investigation beginning in November 2014 into whether Mylan misclassified EpiPen and thereby overcharged the government for EpiPen sales to Medicaid patients. The release stated that during the investigation, the DOJ issued multiple subpoenas and investigative demands, rejected Mylan’s arguments to close the investigation and indicated its intent to sue Mylan if the company failed to make a settlement offer.

The complaint alleges that public companies facing possible material losses from a lawsuit or government investigation must disclose the loss contingency if a loss is reasonably possible and record and an accrual for the estimated loss if the loss is probable and reasonably estimable.

However, the release stated that Mylan failed to disclose or accrue for the loss relating to the DOJ investigation before October 2016, when it announced a $465 million settlement with the DOJ. As a result, Mylan’s public filings were false and misleading, according to the release.

The release also stated that the complaint alleged Mylan’s 2014 and 2015 risk factor disclosures that a governmental authority may take a contrary position on Mylan’s Medicaid submissions, when CMS had already informed Mylan that EpiPen was misclassified, were misleading.

“As alleged in our complaint, investors were kept in the dark about Mylan’s EpiPen misclassification and the potential loss Mylan faced as a result of the pending investigation into the misclassification,” said Antonia Chion, Associate Director in the SEC’s Division of Enforcement. “It is critical that public companies accurately disclose material business risks and timely disclose and account for loss contingencies that can materially affect their bottom line.”

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