Mylan lowballed Medicaid on EpiPen by $1.27B, far more than its DOJ settlement: HHS

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Mylan's $465 million settlement is far short of actual harm to taxpayers of $1.27 billion, according to a new government report.

Mylan quickly agreed to a $465 million settlement with the U.S. government last fall in a move to put some of its EpiPen problems in the past. Now, it appears that figure is far short of taxpayer harm resulting from the injector’s misclassification on Medicaid, news that comes as the deal has yet to be finalized.

The Department of Health and Human Services’ Office of Inspector General reports that EpiPen’s Medicaid misclassification cost taxpayers $1.27 billion from 2006 to 2016, far exceeding the U.S. government’s settlement agreement with the drugmaker.

Under heavy scrutiny for years of price hikes on the lifesaving epinephrine injection, Mylan struck a deal with the government to resolve fresh allegations of Medicaid misclassifications back in October. Investors cheered the move, because some had feared higher potential liabilities from the scandal.

Related: Mylan strikes $465M EpiPen deal with DOJ, but other threats remain

At the time, and continuing since, the Justice Department settlement has faced no shortage of criticism, including barbs from Sens. Richard Blumenthal and Chuck Grassley. Sen. Blumenthal called the settlement “unacceptable” and “a shadow of what it should be.”

In an email to FiercePharma, a Mylan spokesperson said the company has no comment on the OIG findings and continues to “work with the government to finalize the settlement as soon as possible.”

Pushing to learn more about the misclassification, Sen. Grassley on Wednesday said Mylan still isn’t cooperating with the investigation. Mylan is withholding communications between it and the Centers for Medicare and Medicaid Services, which notified the company several times about the misclassification, according to the senator. Grassley serves as chair of the Senate Judiciary Committee.

“The fact that Mylan is unwilling to cooperate and provide documents voluntarily makes me wonder what there is to hide and whether a subpoena is the only way to get to the bottom of this,” Sen. Grassley said in a statement.

Sen. Grassley also went after the Obama Administration for the size of the proposed settlement. The administration apparently "failed to use all available tools to hold Mylan accountable," according to Sen. Grassley. Last year, the Department of Justice agreed to the settlement after just two weeks of close scrutiny on the Medicaid issue.

Related: After Grassley decries 'incomplete response,' Mylan agrees to pony up EpiPen docs

OIG’s findings come after a JAMA Internal Medicine study concluded that EpiPen’s misclassification most likely shortchanged taxpayers. By using public expense figures that date back to 2012, the authors found that the misclassification cost taxpayers $426 million. As the authors pointed out, Mylan acquired EpiPen back in 2007, so their study couldn't calculate the full cost.

The misclassification was only one component of Mylan’s damaging EpiPen controversy, which sprung up last year after news reports highlighted high out-of-pocket costs for the lifesaving drug and the years of price hikes the company implemented on the med.

Since then, new competition from Kaléo Pharma and Impax Labs has hit the market, plus an EpiPen authorized generic, hurting Mylan’s outlook for the big-selling drug. Mylan has also announced thousands of layoffs as it moves to realize savings from an acquisition spree.