Senator Warren Says Mylan Settlement With DOJ ‘Shamefully Weak’

(Bloomberg) -- Massachusetts Senator Elizabeth Warren is the latest critic of the $465 million settlement that drugmaker Mylan NV said it reached with the federal government over Medicaid rebates for its EpiPen allergy shot.

In a letter Friday to Attorney General Loretta Lynch, the Democratic senator wrote that her staff calculated Mylan underpaid Medicaid rebates by an estimated $530 million -- $65 million more than the settlement -- mostly because Mylan didn’t pay the required inflation rebate. Warren wrote the settlement with the Department of Justice is “shamefully weak” because it lacks criminal penalties or any incentive to “prevent drug companies from engaging in abusive schemes to defraud Medicaid and rip off taxpayers.”

Medicaid, which provides health insurance to the poor in the U.S., gets a 23 percent discount on brand-name drugs and a 13 percent discount on generic drugs. EpiPen had been classified incorrectly as a generic since at least 1997, both by Mylan and previous makers of the life-saving medicine, according to the Centers for Medicare and Medicaid Service.

Warren cited how the Justice Department has legal ways to hold Mylan accountable, including pursuing penalties under the False Claims Act.

“This settlement is shockingly soft on this corporate wrongdoer,” Warren wrote.

The Justice Department didn’t comment on Warren’s letter. Previously it declined to comment on Mylan’s announcement of a settlement, an indication that the agreement may not be final and the two sides are still discussing final details of an accord.

Criminal Investigation

On Wednesday, Senator Richard Blumenthal, a Connecticut Democrat, described the settlement as “inadequate” and a “sweetheart deal,” calling for a criminal investigation into the company. Blumenthal is a former federal prosecutor and Connecticut attorney general.

Mylan spokeswoman Nina Devlin declined to comment.

EpiPen pricing first drew attention from Congress in August, and lawmakers asked about Medicaid payments the following month, when Chief Executive Officer Heather Bresch testified Sept. 21 before a House committee. Mylan, based in the Netherlands and run from Canonsburg, Pennsylvania, acquired rights to sell the shot in 2007. Since then it has raised the price by about sixfold, to about $600 per two-pack.

Mylan disclosed in a filing when it announced the settlement that it received an inquiry from the U.S. Securities and Exchange Commission about the Medicaid rebates. The company said it plans to cooperate.

--With assistance from David McLaughlin

To contact the reporter on this story: Jared S. Hopkins in New York at jhopkins38@bloomberg.net.

To contact the editors responsible for this story: Cecile Daurat at cdaurat@bloomberg.net, Stephen West