Mylan Finalizes Settlement Agreement With DOJ For $465M

Mylan N.V. (NASDAQ:MYL) recently announced that its subsidiaries, Mylan Inc. and Mylan Specialty L.P., have signed an agreement with the U.S. Department of Justice (DOJ) and two other relators. The agreement finalizes the Medicaid drug rebate settlement worth $465 million, announced in Oct 2017.

The settlement resolves claims which relates to the classification of EpiPen Auto-Injector and EpiPen Jr Auto-Injector for purposes of the Medicaid Drug Rebate Program.

DOJ wanted to ascertain whether EpiPen products were properly classified with the Centers for Medicare and Medicaid Services as a non-innovator drug under the applicable definition in the Medicaid Rebate statute. The drugs were subjected to the formula which is used to calculate rebates to Medicaid for such drugs.

We note that Mylan has been under immense pressure since Aug 2016 when the company came under the spotlight for price increase of EpiPen since its acquisition of the drug in 2007, drawing immense criticism from lawmakers, consumers and the common people alike. Further, Mylan made it to the headlines for wrongly classifying EpiPen as a generic product in the Medicaid Drug Rebate Program. The misclassification implied that Mylan has been vastly underpaying rebates to Medicaid for the drug for a long time than it would have if the drug was classified as a branded one.

EpiPen Auto-Injector was classified as a non-innovator drug with CMS before Mylan acquired the product in 2007 based on longstanding written guidance from the federal government.

Nevertheless, the settlement provides for resolution of all potential Medicaid rebate liability claims by the federal government, as well as potential claims by certain hospitals and other covered entities that participate in the 340B Drug Pricing Program. Moreover, Mylan will reclassify EpiPen Auto-Injector for purposes of the Medicaid Drug Rebate Program and pay the rebate applicable to innovator products, effective Apr 1.

Mylan’s stock has fallen 16.7% year to date compared with the industry’s decline of 14.9%.

Mylan’s second-quarter results were dismal as the company missed on both earnings and sales estimates due to challenges in North America. The cut in annual guidance was also disappointing. Ongoing challenges in the U.S. and uncertain regulatory environment in the region has led the company to defer all major launches in the U.S. from the 2017 guidance to 2018 including generic version of GlaxoSmithKline Inc. (NYSE:GSK) asthma drug Advair Diskusand generic Copaxone.

Meanwhile, Mylan's Biologics License Application for proposed biosimilar version of Roche Holdings (OTC:RHHBY) Herceptin is currently under review by FDA. The anticipated FDA goal date set under the Biosimilar User Fee Act is Sep3. We expect investor focus on the same.

Zacks Rank

Mylan currently carries a Zacks Rank #5 (Strong Sell).

A better-ranked stock in the health care sector is Gilead Sciences, Inc. (NASDAQ:GILD) which carriesa Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gilead’s earnings per share estimates increased from $7.92 to $8.53 for 2017, over the last 30 days following strong results in the second quarter. The company delivered positive earnings surprises in three of the trailing four quarters, with an average beat of 8.18%.

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