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MONTH-IN-BRIEF (Oct 2019)

Securities Regulation

Pharmaceutical Company Settles SEC Charges of Failing to Properly Account for and Disclose Government Investigation

By Thomas W. White

On September 27, 2019, Mylan N.V. settled charges by the Securities and Exchange Commission that it had failed to properly account for and disclose a Department of Justice investigation into whether Mylan overcharged Medicaid for sales of its EpiPen treatment for severe allergic reactions.   Without admitting or denying the SEC’s allegations, Mylan agreed to pay $30 million to resolve the case.

In its Complaint filed in the United States District Court for the District of Columbia, the SEC alleged that Mylan misclassified EpiPen as a “generic” drug for purposes of the Medicaid Drug Rebate Program, which resulted in Mylan paying lower rebates to the government on Medicaid payments for purchases of EpiPen than if EpiPen had been classified as a “branded” drug.  In October 2014, the government asserted that Mylan had misclassified EpiPen and, in November 2014, the Department of Justice commenced a civil investigation into potential violations of the False Claims Act by virtue of the misclassification and the resulting overcharges.  During the nearly two-year investigation, Mylan responded to multiple subpoenas and investigative demands, signed tolling agreements, provided damages estimates to DOJ, was informed by DOJ that it was prepared to file suit, and made offers of settlement to DOJ.  Mylan did not disclose the investigation or its potential liability until October 2016, when it announced a $465 million agreement in principle with DOJ.

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