The worst appears to be over for Mylan NV and its EpiPen controversy. It took a $465 million settlement with the U.S. Justice Department and a grilling from Congress for its chief executive officer to get there.
The drugmaker’s shares rallied Monday following Friday’s settlement with the Justice Department, resolving claims by Medicaid that Mylan overcharged the government health program for the allergy shot. That helped erase some of the stock’s 26 percent slide since August, when lawmakers began asking why Mylan had raised the EpiPen’s price sixfold since 2007, and whether it ripped off the government along the way. Meanwhile, the cost of the shots hasn’t changed.
If investors were happy, some lawmakers were not.
“This settlement is a shadow of what it should be — lacking real accountability for Mylan’s apparent lawbreaking,” said Senator Richard Blumenthal, a Connecticut Democrat who called for an investigation of Mylan. “The deal short circuits investigation and fact finding necessary to determine the scope of illegality, culpability of individuals, and proof of criminal wrongdoing.”
Mylan CEO Heather Bresch had to weather a brutal hearing from the House Committee on Oversight and Government Reform last month, where lawmakers questioned her honesty and ethics. The Justice Department settlement specifies that there’s no admission of wrongdoing by Mylan or its employees, according to the company, which said it will “continue to work with the government to finalize the settlement.”
Details of the agreement haven’t been filed in court. Nicole Navas, a Justice Department spokeswoman, didn’t immediately respond to an e-mail message seeking comment on Monday, when federal government offices were closed for the Columbus Day holiday.
“EpiPen can now fade off into sunset, removing a major headache for management,” said Jason Gerberry, an analyst with Leerink Partners, calling the settlement and a subsequent guidance cut a small price to pay. “The settlement likely gets the U.S. government out of Mylan’s hair.”
Mylan stock was up 9.1 percent to $39.20 at 11:35 a.m. on Monday, the biggest intraday gain in almost a year.
The focus now may turn to the U.S. agency that oversees Medicaid, the Centers for Medicare and Medicaid Services. The agency said last week that Mylan and previous makers of EpiPen hadn’t been giving the government required discounts since at least 1997. Medicaid, which covers the poor in the U.S., gets a 23.1 percent discount on brand-name drugs, and a 13 percent discount on generic drugs. EpiPen had been incorrectly classified by Mylan as a generic, according to the agency.
It’s unclear, though, how recently CMS realized that error, and what it did about it. Senator Charles Grassley, an Iowa Republican who called for an investigation of Mylan, demanded to know what the agency knew, and when.
“CMS still needs to answer my questions on whether it exerts enough oversight of the Medicaid drug rebate program and when it first notified Mylan that the EpiPen was misclassified,” Grassley said in a statement Friday. “Is CMS doing enough to look out for the taxpayers?”
Aaron Albright, a spokesman for CMS, declined to comment on when the agency knew that Mylan wasn’t giving the discounts it should have on EpiPen. Nina Devlin, a Mylan spokeswoman, declined to comment.
Future Headaches?
For Mylan, while the worst may be done, there are still likely headaches to come. The company has received an inquiry from the U.S. Securities and Exchange Commission, and the House Oversight Committee is collecting internal documents from the company.
“Investors will like the settlement as many will think this puts the issue largely behind the company — we disagree,” said David Maris, an analyst with Wells Fargo & Co. “It does nothing to answer the original issue — EpiPen pricing and consumers.”