Mylan (MYL) plans to pay $30 million to settle a Securities and Exchange Commission lawsuit that alleges the pharmaceutical company failed to disclose potential losses in the wake of an EpiPen scandal.
The generic pharmaceutical company overcharged Medicaid by “hundreds of millions of dollars,” and drew the scrutiny of the U.S. Department of Justice, the SEC said in a news release issued Friday.
But Mylan failed to disclose to investors the potential for losses related to the DOJ investigation for nearly two years. In October 2016, the company announced a $465 million settlement with the DOJ.
“As alleged in our complaint, investors were kept in the dark about Mylan’s EpiPen misclassification and the potential loss Mylan faced as a result of the pending investigations into the misclassification,” Antonia Chion, assistant director of the SEC’s Division of Enforcement, said in a written statement.
She added: “It is critical that public companies accurately disclose material business risks and timely disclose and account for loss contingencies that can materially affect their bottom line.”
Mylan: ‘Right Course’ For Company
Mylan responded by saying: “Mylan believes at this time, taking all other matters into consideration, that this settlement is the right course of action for the company. The company continues to be committed to the highest levels of integrity with respect to all aspects of its business operations, including its public filing disclosures and communications with investors.”
The SEC says Mylan classified its allergenic reaction injection, EpiPen, as a “generic” drug under the Centers for Medicare and Medicaid Services drug rebate program. As a result, Mylan paid much lower rebates to the government than if EpiPen received status as a “branded” drug.
In November 2014, the U.S. Department of Justice began a two-year civil probe. It examined whether Mylan misclassified its EpiPen product.
On the stock market today, Mylan stock slipped 2.4%, to 19.29.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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