Mylan's $465M settlement shortchanges taxpayers: study

Justice statue with sword and scales
A study in JAMA Internal Medicine concludes that Mylan's proposed $465 million settlement with the government is likely too low.

When the U.S. government agreed on a $465 million Medicaid misclassification settlement with Mylan, did it agree on an amount that was too low? A new study says that’s likely the case.

By calculating publicly available data on acquisition costs for Mylan’s EpiPen and incorporating prescription volumes plus branded and generic rebate rates under the federal healthcare program, Harvard researchers conclude that the settlement seems a little light.

At a bare minimum, Mylan avoided paying $426.1 million in rebates due to EpiPen's misclassification as a noninnovator med, according to the study, published in JAMA Internal Medicine. Their calculations, however, reach back only to 2012, and Mylan picked up EpiPen in 2007, the group points out.

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Mylan declined to comment on the study and didn’t update on the status of the settlement, which hasn’t been finalized despite being announced more than 5 months ago.

Only weeks after EpiPen's misclassification on Medicaid came under scrutiny, Mylan announced the $465 million deal with the Department of Justice. Shares initially jumped as investors thought the risks would have been higher. Mylan admitted no wrongdoing in the deal proposal.

Public officials lambasted the agreement, calling the settlement “unacceptable” and “a shadow of what it should be.”

RELATED: Senator blasts DOJ's 'unacceptable' deal with Mylan, urges AG to dig deeper

Writing in JAMA Internal Medicine, researchers Jing Luo, M.D., Aaron Kesselheim, M.D., J.D., and Jerry Avorn, M.D., point out that the settlement “underestimates the actual cost of Mylan’s strategy” to Medicaid, “pointing to the limits of litigation as a way of recovering taxpayer funds.” Instead, they believe, it shouldn’t be up to drug companies to classify their meds as a generic or a branded pharmaceutical.

Litigation expenses, additional rebate agreements and uncertainty surrounding the government’s responsibility could have also played a role in the settlement negotiations, said the the authors, who are members of the Division of Pharmacoepidemiology and Pharmacoeconomics at Harvard Medical School.

RELATED: Mylan closing Illinois plant, cutting 90 jobs as part of slim-down after Meda buyout

Last fall, Mylan's EpiPen was swept up in a high-profile drug pricing controversy as politicians and the public lambasted the company's hikes over several years. As a result of the pressure, Mylan launched an authorized generic at half the price and boosted its patient assistance program. It's also reportedly setting up its own pharmacy to cut out drug middlemen, whom CEO Heather Bresch has blamed for some high costs.

Meanwhile, Mylan is working to trim its workforce after an M&A spree, announcing a plant closure in Illinois this week that’ll impact 90 employees. All told, it’s aiming for up to 3,500 layoffs.