Shares of generic maker Mylan N.V. (MYL - Free Report) were down 2.4% after U.S. Securities and Exchange Commission (SEC) announced charges against the company in connection with its EpiPen product probe.
The SEC charged Mylan for accounting and disclosure failures relating to a Department of Justice (DOJ) probe into whether the company overcharged Medicaid by hundreds of millions of dollars for its largest product, EpiPen. The SEC stated that investors were kept in the dark about EpiPen misclassification and the potential loss the company faced as a result of the pending investigation into the misclassification.
Consequently, Mylan has agreed to pay $30 million as charges for the same.
Per SEC’s complaint, the company misclassified EpiPen as a "generic" drug under the Medicaid Drug Rebate Program. This led Mylan to pay much lower rebates to the government than what it would have paid if EpiPen had been classified as a "branded" drug. The complaint also states that the Centers for Medicare and Medicaid Services (CMS) informed Mylan in October 2014 about this misclassification.
Thereafter, the DOJ conducted a civil investigation into whether the company misclassified EpiPen and thereby overcharged the government for the drug’s sales to Medicaid patients. The investigation started in November 2014 and continued for nearly two years. During the investigation, DOJ issued multiple subpoenas and investigative demands, rejected Mylan’s arguments to close the investigation, and indicated its intent to sue the company if it failed to make a settlement offer.
Moreover, the complaint alleges that Mylan produced documents and other information to DOJ, including potential damage calculations and offers for settlement. The allegations of misclassification and resultant charges further add to Mylan’s woes.
The stock has lost 29.6% year to date compared with the industry’s decline of 7.2%.
Earlier, there were allegations against Mylan and rival Teva Pharmaceuticals (TEVA - Free Report) for inflating the prices of generic drugs. Both companies were also accused of obstructing a probe on the same by a few lawmakers.
The going has been tough lately for Mylan. It had previously undertaken a strategic review of its business due to challenging business conditions in North America and pricing pressures. Along with the quarterly results, Mylan announced a merger agreement with Upjohn, Pfizer's (PFE - Free Report) off-patent branded and generic established medicines business (including Lipitor, Celebrex and Viagra), to create a new global pharmaceutical company. The decision to merge with Upjohn comes as a result of this review.
Zacks Rank and a Stock to Consider
Mylan currently carries a Zacks Rank#3 (Hold).
A better-ranked stock in the same space is Dr. Reddy's Laboratories Ltd (RDY - Free Report) with a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Dr. Reddy's earnings estimates have moved up by 37 cents to $2.06 for 2019 over the past 90 days.
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