Mallinckrodt agreed to pay $100 million and license one of its products to a competitor to wrap up a Federal Trade Commission probe inherited when it bought Questcor Pharmaceuticals in 2014.
The FTC investigation had focused on a deal Questcor made in 2013 to buy Synacthen Depot, a potential rival to its controversy-prone anti-inflammatory drug H.P. Acthar Gel. After snapping up that drug, which isn’t approved in the U.S., Questcor steered development toward uses that wouldn’t conflict with its own product.
“Questcor took advantage of its monopoly to repeatedly raise the price of Acthar, from $40 per vial in 2001 to more than $34,000 per vial today—an 85,000 percent increase,” said FTC Chairwoman Edith Ramirez in a statement. “We charge that, to maintain its monopoly pricing, it acquired the rights to its greatest competitive threat, a synthetic version of Acthar, to forestall future competition.”
Though Synacthen is not approved in the U.S., it is used in other countries to treat infantile spasms and nephrotic syndrome, two of Acthar’s key indications, the FTC says.
Acthar has spent a lot of time in the spotlight since it made its debut in 2010 as a treatment for infantile spasms. Marketed by Questcor until that company sold to Mallinckrodt, the product made headlines first for the repeated large price hikes that pushed it into the ranks of the most-expensive drugs on the market. Questcor also drew fire for allegedly lax side-effects reporting, and finally for a snarl of state and federal investigations into anticompetitive activity. Mallinckrodt took on the outstanding investigations when it bought Questcor, including this FTC probe.
Now, in addition to paying $100 million to the federal government and five states, Mallinckrodt will license Synacthen to Marathon Pharmaceuticals, for development as a treatment for infantile spasms and nephrotic syndrome, two of Acthar’s FDA-approved uses. The company retains the rights to Synacthen for other indications, including Duchenne muscular dystrophy, which is its current focus.
In an investor note, Wells Fargo analyst David Maris said the settlement news “was not as bad as some had initially feared, and we are not sure it qualifies as bad news in the final analysis.”
The $100 million payment won’t be difficult for Mallinckrodt to bear, Maris figures, and developing Synacthen in infantile spasms and nephrotic syndrome will take years of work.
“To us, the news of a settlement is much better than the initial ominous-sounding headlines that came across about pending charges,” Maris wrote, adding, “We believe there are a lot of risks associated with developing Synacthen for Acthar indications, and as such, we doubt that even if successful, we will see any Synacthen-related approvals for possibly 7-plus years.”
In announcing the settlement, Mallinckrodt focused on the difficulty of developing Synacthen as an Acthar rival. Citing the FTC’s statement that Synacthen will need to undergo clinical trials before launching in the U.S., the company said, “This would entail convincing patients or the parents of infant patients in fragile, high-risk populations to forgo existing approved, effective treatments and enroll in an experimental protocol where they risk receiving less effective treatment or no treatment at all.” The company also pointed out that another company had sidelined a potential Acthar competitor citing R&D difficulties.
"We like Mallinckrodt’s valuation but like many investors, we wish Acthar did not have the capacity to attract so much drama," Maris wrote.