An EpiPen set during a House Oversight Committee hearing on Capitol Hill addressing the price increase of the company's EpiPen product. Photo: Diego M. Radzinschi/ALM

Mylan NV, manufacturer of the lifesaving allergy medication EpiPen, has agreed to pay $30 million in fines to settle charges by the U.S. Securities and Exchange Commission that the company misled investors by making false accounting statements and disclosures about a Justice Department probe into whether the company had overcharged Medicaid by hundreds of millions of dollars, the SEC announced Friday.

Without admitting or denying the SEC's allegations, Mylan, headquartered in the Netherlands with U.S. operations based in Canonsburg, Pennsylvania, agreed to the entry of a final judgment ordering a $30 million penalty and permanently enjoining it from violating sections of the Securities Act of 1933 and Securities Exchange Act of 1934.

"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 company said in a statement Friday. 

In its complaint filed in federal district court in Washington, D.C., the SEC alleged that Mylan had misclassified EpiPen, its most profitable product, which treats anaphylactic shock, as a generic drug under the Medicaid Drug Rebate Program instead of as a branded drug, resulting in much lower rebates to the federal government. According to the complaint, the company had raised the price of the drug more than 500% during the period during which the company was misclassifying it as generic, but failed to pay the additional rebates to the federal government.

The complaint alleges that in October 2014 the Centers for Medicare and Medicaid Services informed Mylan that EpiPen was misclassified, and that starting the following month and for nearly two years after, the Justice Department conducted a civil probe into the matter. During the investigation, the DOJ issued multiple subpoenas and demands, and rejected Mylan's attempts to close the investigation. It also informed Mylan of its intent to sue if the company didn't make a settlement offer and the company produced documents to the department including potential damages calculations and settlement offers, according to the complaint.

But the SEC alleges in the complaint that Mylan failed to disclose or account for financial losses from the DOJ's investigation in its public filings until October 2016, when the company finally announced a $465 million settlement with the DOJ.

As a result, the SEC charged that Mylan's public SEC filings for investors were false and misleading and that its 2014 and 2015 risk factor disclosures were inaccurate because they stated that a government authority "may" take a contrary position on its Medicaid submissions, when in fact the CMS had already informed the company that EpiPen was misclassified.

Antonia Chion, associate director in the SEC's division of enforcement said in a statement: "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. 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."

The SEC's investigation was conducted by Ian Dattner and Daniel Maher, under the supervision of Lisa Deitch, Peter Rosario and Antonia Chion. 

Brian Roman is general counsel for Mylan, which did not respond to a request for comment. Mylan is represented by Debevoise & Plimpton, which also did not respond to a comment request.

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