Every day seems like a new test for Mallinckrodt investors: Consider last month, when Humana took the company to court for $700 million in fraudulent billing. But now, with Mallinckrodt reportedly talking bankruptcy if federal opioid penalties balloon out of control, it could be the last straw.
Chafing under federal kickback charges tied to controversial gel H.P. Acthar, Mallinckrodt appeared to be out of the woods with a settlement in the works. Turns out, it was out of the frying pan and into the fire.
Mallinckrodt Plc on Wednesday said it had tentatively agreed to pay $15.4 million to resolve a U.S. Justice Department probe into how a drugmaker it now owns marketed an expensive treatment for a rare infant seizure disorder and multiple sclerosis.
The U.S. Justice Department has joined a pair of whistleblower lawsuits alleging a drugmaker now owned by Mallinckrodt Plc improperly promoted an expensive multiple sclerosis treatment and paid kickbacks to doctors who prescribed the drug.
More than 80% of doctors who filed Medicare claims in 2016 for H.P. Acthar Gel -- a drug best known for treating a rare infant seizure disorder -- received money or other perks from the drugmakers, according to a CNN analysis of publicly identified prescribers.
Mallinckrodt is trying to reduce its reliance on cash cow product Acthar (corticotropin) for infantile spasms and multiple sclerosis, which brought in sales of almost $309m in the third quarter of 2017, down 6%. Acthar’s slowdown has been attributed by the company to payer resistance affecting prescription fulfilment, and the drug has also been in the spotlight in the US over price increases that culminated in a payer lawsuit a few weeks ago.
The allegations, brought by the Federal Trade Commission and attorneys general from five states, center on H.P. Acthar Gel, a rare-disease drug that currently has “limited direct competition,” according to a regulatory filing by the company. Acthar Gel, which once sold for $40 a vial, was acquired by Questcor Pharmaceuticals in 2001 for $100,000 plus royalties according to the lawsuit. Questcor — which was acquired by Mallinckrodt in 2014 — then raised the list price of the drug, ultimately to more than $34,000 a vial. The drug brought in more than $1 billion in U.S. revenue in 2015 for Mallinckrodt, according to the legal complaint.
Call it a case of tempting fate or instant karma—the cosmos sought its inevitable revenge when Martin Shkreli, the hip-hop-loving, drug-price-inflating biotech executive, was arrested, indicted, and perp-walked on Dec. 17. But the activities that got him crosswise with the feds aren’t what the 32-year-old Twitter addict with the sardonic smirk will be remembered for. What’s so troubling and important about his story is that the way he ran his drug companies—the amoral but probably legal business plans he employed—were of a piece with mainstream pharmaceutical marketing.
Mallinckrodt's shares have suffered since short seller Citron Research called out the company's pricing policies and marketing efforts last week. A newly disclosed price hike set off a storm of criticism earlier this week. Now, the company is seeking to gin up shareholder support with a $500 million boost to its stock-buyback program.
Mallinckrodt Plc shares plummeted after the drugmaker was mentioned on Twitter by Citron Research, the stock-commentary site whose scrutiny helped lead to a rout of Valeant Pharmaceuticals International Inc.’s stock.