MORGANTOWN — Mylan NV has finalized its $30 million settlement with the SEC regarding charges relating to accounting and disclosure failures connected to a Department of Justice probe into Mylan overcharging Medicaid by hundreds of millions of dollars for its EpiPen.
Mylan and the SEC announced the settlement in separate announcements Friday morning.
Antonia Chion, associate director in the SEC’s Division of Enforcement, said, “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 investigations into the misclassification. 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.”
Mylan and the SEC reached an agreement-in-principle in July, as The Dominion Post reported at the time.
Mylan said Friday, “Mylan believes at this time, taking all other matters into consideration, that this settlement is the right course of action for the company. The company continues to be committed to the highest levels of integrity with respect to all aspects of its business operations, including its public filing disclosures and communications with investors.”
Under the agreement, Mylan said, it neither admits nor denies the SEC’s allegations and has consented to the entry of a final judgment. “Today’s settlement fully resolves the SEC’s investigation.”
The SEC complaint says 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.
In October 2014, the Centers for Medicare and Medicaid Services informed Mylan that EpiPen was misclassified as a generic drug. Starting in November 2014, and continuing for nearly two years, the DOJ conducted a civil investigation into Mylan’s alleged misclassified and potential overcharges.
“During the investigation,” SEC said, “DOJ issued multiple subpoenas and investigative demands, rejected Mylan’s arguments to close the investigation, and indicated its intent to sue Mylan if Mylan failed to make a settlement offer. As alleged in the complaint, Mylan produced documents and other information to DOJ, including providing potential damages calculations and making offers of settlement.”
The SEC said it requires public companies facing possible material losses from a lawsuit or government investigation to disclose the loss contingency if a loss is reasonably possible; and record an accrual for the estimated loss if the loss is probable and reasonably estimable.
But 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 DOJ.
“As a result, Mylan’s public filings were false and misleading,” SEC said. “Further, as alleged in the complaint, 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.”
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