Mylan stock climbed as much as 14 per cent in early US trading after the drug maker agreed to pay the US government $465 million (€416 million) in a swift settlement over how it charged Medicaid for its allergy shot EpiPen.

The stock was up 13 per cent to $40.45 in premarket trading in New York, after closing last week at $35.94, the lowest in more than three years.

The accord offers a reprieve to investors concerned that the penalty could have been significantly larger, while resolving part of the controversy over Mylan’s price increases on EpiPen.

The fallout from the higher prices, which enraged patients and prompted probes from congress, had cut Mylan’s stock price by a quarter since August.

The agreement with the justice department and other agencies resolves “all potential rebate liability claims by federal and state governments”, Mylan said in a statement on Friday.

Wrongdoing

As part of the settlement, there was no admission of wrongdoing by Mylan or its employees. Mylan said it would “continue to work with the government to finalise the settlement”, suggesting that some aspect of the agreement could change.

The US Centers for Medicare and Medicaid Services, or CMS, said in a letter this week that Mylan had misclassified EpiPen under the Medicaid health programme for the poor.

EpiPen had been classified as a generic drug, while the government has said it was a brand-name product and that Mylan should have given states and the US bigger rebates. – (Bloomberg)