After $465 Million Payout, Mylan Still Faces Shareholder Lawsuit

Pharmaceutical Investing
Pharmaceutical Investing

As we predicted several weeks ago, Mylan isn’t out of hot water yet: the embattled pharmaceutical giant now faces a class action lawsuit from shareholders.

First, Mylan Pharmaceuticals (NASDAQ:MYL) faced public backlash for hiking the price of their epiPen, with CEO Heather Bresch hauled before congress to defend both the increase and her own salary. Then Mylan avoided a rebate liability lawsuit—again related to the epiPen—by agreeing to pay the Department of Justice $465 million. But as we predicted several weeks ago, Mylan isn’t out of hot water yet: the embattled pharmaceutical giant now faces a class action lawsuit from shareholders.
A securities class action suit has been filed on behalf of all Mylan shareholders who purchased stock between February 28, 2013 and October 7, 2016. The suit alleges Mylan violated Sections 10(b) and 20(a) of the 1934 Securities Exchange Act, by making false statements specifically related to the Medicaid rebate issue.
Recall that the Department of Justice accused Mylan of purposefully misclassifying their epinephrine injectors as a generic drug in order to pay lower quarterly rebates. That suit was settled outside of court for $465 million, as mentioned above. But Mylan may still have to pay more.


According to the class action complaint filed on October 13, 2016, “”as a result of the incorrect classification Mylan’s public statements were materially false and misleading at all relevant times.” The suit holds that Mylan should be held accountable to stockholders for subsequent drops in share value.
Indeed, Mylan’s stock has fallen dramatically as a result of these scandals. But the resolution with the Department of Justice seemed to signal a respite: on October 10, 2016, shares rose close to ten percent, with investors seeming to believe the $465 million payout would allow the company to avoid a much costlier suit.
But since October 13, 2016—the same day the legal class action was announced—Mylan’s stock has been back on that downward trend. It lost 3.67 percent by the close of trading on Friday.
The company has yet to comment on this newest lawsuit.

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Securities Disclosure: I, Chelsea Pratt, hold no direct investment interest in any company mentioned in this article.
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