The deal was prompted by a firestorm of criticism by consumers and Congress over Mylan having hiked the price of the life-saving EpiPens to more than $600 for a twin-pack this year. The auto-injector devices are used to counteract the potentially fatal allergic reaction anaphylaxis.
Amid that criticism, questions were raised whether Mylan should have been paying a rebate rate of at least 23.1 percent — and probably well more than that — to Medicaid for EpiPen sales, instead of the 13 percent rate it had been paying.
The lower rate is owed by generic products, and the higher rates are paid by brand-name products.
Mylan claimed that it was paying the lower-rate under long-standing guidance from the federal Centers for Medicare and Medicaid Services. But CMS recently said that it had repeatedly told Mylan it should be paying the higher rate.
Brand name drugs whose prices are increased above the rate of inflation can pay a much higher rebate rate than 23.1 percent because of an adjustment provision in the Medicaid Drug Rebate Program. Under that program, drug companies that want to sell medications to enrollees in Medicaid must pay back a percentage of their sales to Medicaid.
Because Mylan has increased EpiPen prices more than 500 percent in recent years, analysts have suggested that the rebates owed to Medicaid by the company could nearly equal what it makes in sales through Medicaid.
Sen. Elizabeth Warren, D-Mass, last week sent Attorney General Loretta Lynch a letter saying that the deal with Mylan appeared to be "shamefully weak." Warren said her staff had calculated that under the agreement Mylan may have been allowed to keep $65 million it should have paid the government in rebates.
However, Evercore ISI analyst Umer Raffat has said that if CMS told Mylan as far back as 2011 that it was paying the incorrect rebate rate, the company may have shortchanged Medicaid more than $700 million since then in rebates. That would be more than $235 million more than what Mylan has agreed to pay under the Justice Department settlement.
However, CMS has not revealed when it first told Mylan it was paying the correct rebate rate.
The Wall Street Journal on Thursday reported that Mylan executives, including CEO Heather Bresch, are unlikely to see their compensation reduced as a result of the $465 million settlement, because of the of the company 's practice of excluding litigation costs from pay calculations.