According to the New York Times, Mylan, the maker of the allergy treatment EpiPen, said Friday that it had reached a $465 million settlement with the Justice Department and other government agencies over questions on whether the company had overcharged Medicaid for the treatment by improperly classifying it as a generic drug.
1. What is the difference from an accounting standpoint on whether a drug is classified as a brand-name or a generic?
2. What is the federal government rule issued this year for companies with new drug applications?
3. Besides the settlement, what other steps is the Medicaid program taking to see that other companies are not overcharging for their drug products?
4. If you assume that Medicaid was paying approximately $300 for the pens, approximately how many pens did the program buy from Mylan between 2011 and 2015?
5. How much of the revenue to Mylan comes from the government?
6. In addition to the settlement, what adjustments will Mylan’s financial reportings see?
7. How should Mylan account for the settlement based on financial accounting practices? Based on income tax practices?
Thomas, K. (2016). Mylan to Settle EpiPen Overpricing Case for $465 Million. (Retrievable online at http://www.nytimes.com/2016/10/08/business/epipen-mylan-justice-department-settlement.html)