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Jon Coss
Jon Coss
Pondera's FraudCast Blog
Does the Mylan EpiPen Settlement Send the Wrong Message to Fraudsters?

Does the Mylan EpiPen Settlement Send the Wrong Message to Fraudsters?

The United States government and several states recently announced that they had settled a $465 million lawsuit against Mylan Inc., the maker of the EpiPen. The Department of Justice stated that Mylan had “knowingly” misidentified the EpiPens as generic to reduce the number of rebates it owed to state Medicaid programs. All drug manufacturers, including Mylan, must agree to the rebate program to be eligible to supply drugs through Medicaid.

Those of you that follow these types of stories may recall that Mylan was accused of price gouging last year when they increased the price for a 2-pack of EpiPens to $600—a 400% increase over 6 years. In addition to the price gouging accusations, Mylan was also forced to settle a separate Medicaid billing complaint in 2009.

EpiPens, for those of you unfamiliar with them, are self-injectable medical devices used to offset often life-threatening allergic reactions to bee stings, foods, and medications. As a parent of two EpiPen-carrying children, I can certainly attest to the importance of the device. I suppose that’s part of the reason Mylan felt comfortable increasing their prices so dramatically.

What really bothers me about this case is the fact that the settlement represents only 134% of the total amount of damages incurred. This 34% “penalty”, on top of what was already owed, isn’t much of a deterrent against improper billings, as evidenced by the fact that Mylan has been busted twice in just eight years. Consider that this is a company with over $11 billion of revenue in 2016. Also consider that Mylan’s stock price increased 1% on the news of the settlement, no doubt reflecting the fact that investors expected a larger settlement.

In my opinion, this settlement sends the wrong message to unscrupulous businesses. They may look at these numbers and figure that "intelligent cheating" could be quite profitable, encouraging them to simply write off lawsuits as a cost of doing business. This is despite the fact that they would be violating the federal False Claims Act which addresses contractors who defraud the government.

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