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.
The Department of Justice (DOJ) filed new charges Wednesday against Mallinckrodt, which acquired Acthar-maker Questcor Pharma in 2014, accusing the company of funneling money through front funds to illegally subsidize Medicare copays and jack up the drug’s list price 85,000%. The newest charges filed in Pittsburgh federal court come the same day as the drugmaker and the federal government agreed in principle to a $15.4 million settlement on separate charges tied to two whistleblower kickback suits the DOJ joined in early May.
Mallinckrodt called the settlement “fair and reasonable” in a statement and vowed to fight the new federal charges.
“As we have said repeatedly, where we can resolve legacy legal matters in a reasonable and manageable way, we will do so,"
In their suit, federal prosecutors accused Mallinckrodt, through Questcor, of using three funds to illegally subsidize Medicare patient copays for Acthar while hiking the price of the drug from $50 to $32,000 per vial. In doing so, the DOJ alleged the company defrauded the federal government of millions of dollars through false Medicare claims and induced doctors to boost prescriptions of the drug.
“The subsidies it routed through these funds drove Acthar prescribing and was a proven method that negated concerns about the cost of the drug, allowing (Mallinckrodt) to continually raise its price,” prosecutors said.
In a note to analysts Thursday, Wells Fargo analyst David Maris said the combination of the newest charges and Mallinckrodt's decision in May to sue the federal government over $600 million in back Medicaid rebates it said it did not owe could spell sales trouble for Achtar in the near future. Maris forecast Acthar would undershoot sales projections by $10 million per year in 2020 and 2021 and $5 million for every year after.
"We believe that the threat of competition and the increased scrutiny of payors warrants a more conservative view (for Acthar) than our previous assumptions," Maris wrote.
On Thursday, Mallinckrodt's share price had dropped to $8.50 from a high of $9.71 per share Wednesday morning.
The newest charges are only the latest knocks in Mallinckrodt’s troubled history with Acthar, which appeared to reach its nadir when the DOJ joined two whistleblower suits against the company in May.
Prosecutors said Questcor ran a “high-tiered strategy” to pay doctors to boost scripts for Acthar while using “dirty data” to mislead payers on the drug’s safety and usefulness. Whistleblowers said the company intimidated and fired employees who called its marketing strategy into question, using sham internal investigations to cover up illegal activity.
In its proposed settlement with the feds, Mallinckrodt did not admit any wrongdoing in the scheme, which allegedly took place prior to the Questcor acquisition. Mallinckrodt has argued that Acthar’s astronomical price increases took place prior to the Questcor buyout, although the company has instituted routine price hikes since acquiring the drug.
Those price hikes were the target of a separate federal probe Mallinckrodt settled for $100 million in 2017 alleging Questcor bought and shelved an Acthar competitor in order to gouge the drug’s list price. The Federal Trade Commission investigation focused on Questcor’s 2013 acquisition of Synacthen Depot, a rival drug that regulators said was put aside in favor of development that didn’t compete with Acthar.