Mylan agreed Friday to a $465 million settlement with the U.S. Department of Justice and other agencies over the classification of its anti-allergy EpiPen Auto-Injector under the Medicaid Drug Rebate program.
Separately, the company slashed its earnings forecast for the year, citing changes it made in an access program it offers to patients, and the planned launch of a generic version of the device.
At issue in the settlement was whether the EpiPen should be classified as a generic or a brand-name drug under the terms of Medicaid Drug Rebate program. The classification is key to determining how much a drugmaker pays to Medicaid to be included in the government-run health program.
Under the rebate program, companies that sell generic drugs or products through Medicaid pay a 13 percent rebate to the agency. But those who sell brand-name products are required to pay a rebate of at least 23.1 percent.
In Mylan's case, a brand-name classification could have possibly resulted in a still higher percentage rebate because companies that hike a product's price faster than the rate of inflation are required to pay an additional amount.
CNBC reported earlier Friday that an Evercore ISI analysis found that Mylan might have shortchanged Medicaid by more than $700 million over a five-year period based on an estimate by a state Medicaid agency that the company was not paying states 85 percent of what it owes in EpiPen rebates.
The federal Centers for Medicare and Medicaid Services previously said that Medicaid and Medicare Part D had paid nearly $1.3 billion in EpiPen purchases from 2011 through 2015, before factoring any rebates from Mylan.
Mylan has been under fire from lawmakers over the steep rise in the cost of the anti-allergy device, which has risen over 350 percent over the past five years.
Under the terms of the settlement, Mylan has not admitted to any wrong doing.
"This agreement is another important step in Mylan's efforts to move forward and bring resolution to all EpiPen Auto-Injector related matters," said Mylan CEO Heather Bresch, in a written statement.
"The agreement is in addition to the significant steps Mylan has taken in relation to EpiPen Auto-Injector over the past several weeks, including the unprecedented, pending launch of a generic version of EpiPen Auto-Injector and expansion of our patient access programs for this product," she said. "Entering into this settlement is the right course of action at this time for the Company, its stakeholders and the Medicaid program."
The settlement's terms provide for the resolution of all potential rebate liability claims by federal and state governments over EpiPen's classification.
In connection with the settlement, Mylan expects to enter into a corporate integrity agreement with the Office of Inspector General of the Department of Health and Human Services.
"Today, through an SEC filing, Mylan Pharmaceutical announced that it has come to an agreement in principle with the federal government over a dispute over the misclassification of Epipen in the Medicaid Drug Rebate Program. We have no further comment at this time," a Centers for Medicare and Medicaid Services spokesman told CNBC.
Sen. Chuck Grassley, R-Iowa, said in a Friday statement that the settlement "substantiates" his concerns about Mylan and raises more questions about the industry.
"CMS still needs to answer my questions on whether it exerts enough oversight of the Medicaid drug rebate program and when it first notified Mylan that the EpiPen was misclassified," he said. "This settlement shows a big problem with just one company and one product. Are there others and is CMS doing enough to look out for the taxpayers?"