Financial Statement Fraud Case About EpiPen

Mylan’s Fraudulent Actions with EpiPen

Mylan bought EpiPen in 2007 and started selling the product to the US federal government at a higher price. It did this through classification of the product as generic instead of a brand-name (Thomas, 2016). Product classification makes a big difference in that a generic product attracts rebates of 13 percent to the government while brand-name classification attracts discounts of 23 percent off the value of 13 percent. The generic designation means overcharging the taxpayers and paying less in rebates (Thomas, 2016). Mylan bought the product in 2007 when it was selling at $100 and has been sold up to over $600 for a pack of two.

Concealment of Fraud and Competitive Advantage

The company perpetrated the fraud and concealed it through the wrong classification that enabled it to usurp more from the government and paid very little in rebates in a manner that allowed it to obtain a competitive edge over its principal competitor, Sanofi (Thomas, 2016). The Medicaid’s drug rebate program imposes more rebate rates on brand-name products as compared to the generic ones and a close examination of the EpiPen and its pricing, it matches the classification of brand-names hence the fraud that Mylan committed (Pierson, 2017). However, Sanofi played a crucial role in exposing the fraud in July 2016 in a wrapped federal case in Massachusetts, through which it claimed that Mylan violated the False Claims Act by underpaying Medicaid rebates.

Whistleblower Revelations and Overpayment

Notably, the same company had acted as a whistleblower back in 2014 when it raised complaints regarding rebate underpayments by Mylan (Pierson, 2017). The company is currently struggling with the fraud case with some reports indicating that taxpayers may have overpaid $1.27 billion for the last ten years Mylan has sold the product primarily through the federal government and state Medicaid programs.

References

Pierson, B. (2017). Mylan hit with new class action lawsuit over EpiPen pricing. Retrieved from https://www.reuters.com/article/mylan-nl-epipen-lawsuit/mylan-hit-with-new-class-action-lawsuit-over-epipen-pricing-idUSL2N1HB1TA

Thomas, K. (2016). Mylan to Settle EpiPen Overpricing Case for $465 Million. Retrieved from https://www.nytimes.com/2016/10/08/business/epipen-mylan-justice-department-settlement.html