UPDATE 2-Mylan settles Medicaid dispute, to pay $121 mln

* Dispute involves Medicaid rebates on sales from 2000-04

* Mylan to take one-time charge of $83 mln in Q3

* To seek recovery of substantial portion of settlement (Adds Justice Department comments)

NEW YORK, Oct 19 (Reuters) - Generic drugmaker Mylan Inc (MYL.O) said on Monday it will pay $121 million to settle a long-standing civil dispute with the U.S. government involving Medicaid rebates on sales from 2000 through 2004.

Mylan said it will record a one-time after-tax charge of about $83 million against third-quarter results.

But the company said it intends to seek recovery of a substantial portion of the settlement from any drugmakers that received overpayments.

The settlement includes no admission or finding of wrongdoing on the part of Mylan, the Pittsburgh-based company said. The allegations involved more than a dozen drugs from Mylan and subsidiary UDL Laboratories, according to the U.S. Department of Justice.

The dispute involved whether, for purposes of rebates under Medicaid, an authorized generic medicine is subject to the generic rate that Mylan paid on sales from 2000 through 2004, or a higher innovator rate. Medicaid is the U.S. government health program for low-income Americans.

Authorized generics are typically sold by or under the auspices of branded drugmakers as a way to retain more revenue once a medicine faces competition from cheaper generics.

In this matter, the settlement includes products supplied by branded pharmaceutical companies, or third party innovators, to Mylan for sale as generics.

The U.S. government classifies authorized generics as new drugs and subject to different reimbursement rates than traditional generic copies.

Mylan was treating its authorized generics as traditional generics -- a practice it had begun before government guidelines on authorized generics were put in place and one that continued through 2004.

The settlement resolves claims by the federal government, relevant states and a private individual who brought the practice to the attention of authorities, the company said.

The Justice Department said AstraZeneca Plc (AZN.L) also paid $2.6 million to resolve allegations that it underpaid rebates for albuterol, a common respiratory drug. Johnson & Johnson's (JNJ.N) Ortho-McNeil unit paid $3.4 million to settle similar allegations over Dermatop, a steroid cream.

As a whistle-blower in the case, Ven-A-Care, a pharmacy in Key West, Florida, will receive about $10.8 million as its share of the recovery, the Justice Department said.

Mylan shares were down 15 cents at $16.52 in afternoon trading on Nasdaq. (Reporting by Bill Berkrot and Lewis Krauskopf; editing by Andre Grenon and Gerald E. McCormick)