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Mylan will pay $465 million to resolve False Claims Act liability

Joe Mont | August 22, 2017

Pharmaceutical companies Mylan Inc. and Mylan Specialty L.P. have agreed to pay $465 million to resolve claims that they violated the False Claims Act by knowingly misclassifying EpiPen as a generic drug to avoid paying rebates owed primarily to Medicaid.

Both companies are wholly owned subsidiaries of Mylan N.V., headquartered in Canonsburg, Pennsylvania. The announcement was made on Aug. 17.

Congress enacted the Medicaid Drug Rebate Program to ensure that state Medicaid programs were not susceptible to price gouging by manufacturers of drugs that were available from only a single source. It subjected single-source, or brand name drugs, to a higher rebate that is payable to Medicaid and that increases to the extent the price of the drug outpaces the rate of inflation. In contrast, generic drugs originating from multiple manufacturers are subject to lower rebates that, at least until recently, were not subject to inflationary adjustments.

The announced settlement resolves the government’s allegations that Mylan, by erroneously reporting EpiPen as a generic drug to Medicaid despite the absence of any therapeutically equivalent drugs, was able to demand massive price increases in the private market while avoiding its corresponding rebate obligations to Medicaid.

Between 2010 and 2016, Mylan increased the price of EpiPen by approximately 400 percent, yet paid only a fixed 13 percent rebate to Medicaid during the same period, the Justice Department said. It alleged that although Mylan was well-aware that its drug was not a generic, it nevertheless claimed generic status for EpiPen in the Medicaid program to avoid paying a higher rebate.

The settlement resolves allegations brought in a lawsuit filed under the whistleblower provisions of the False Claims Act, which permits private parties to sue on behalf of the government for false claims for government funds and to receive a share of any recovery. The whistleblower in this case was the pharmaceutical manufacturer, Sanofi-Aventis US LLC. It will receive approximately $38.7 million as its share of the federal recovery.

Mylan also entered into a corporate integrity agreement with the Department of Health and Human Services Office of Inspector General that requires, among other things, an independent review organization to annually review multiple aspects of Mylan’s practices relating to the Medicaid drug rebate program.

 “Our five-year corporate integrity agreement requires intensive outside scrutiny to assess whether Mylan is complying with the rules of the Medicaid drug rebate program,” Gregory Demske, chief counsel to the Inspector General for the U.S. Department of Health and Human Services, said in a statement. “In addition, the CIA requires individual accountability by Mylan board members and executives.”

The investigation was conducted by the Justice Department’s Civil Division and the U.S. Attorney’s Office for the District of Massachusetts, in conjunction with various state attorneys general, the Department of Health and Human Services Office of Inspector General, and the Medicaid Fraud Control Units.

The case is captioned United States ex rel. Sanofi-Aventis US LLC v. Mylan Inc., et al., No. 16-CV-11572 (D. Mass.).

The claims settled by the agreement are allegations only, and there has been no determination of liability.