Deal size: $5.6 billion
Date announced: April 7, 2014
When Irish drugmaker Mallinckrodt offered up $5.6 billion to snag Questcor Pharma and its infantile spasm medication, H.P. Achtar Gel, it knew well the controversy surrounding the drug. But upping the price of a drug to astronomical levels is one thing––and allegedly paying physician kickbacks is another, and those claims among others have cost Mallinckrodt dearly.
Meanwhile, that astronomical price is one reason why Acthar became a blockbuster—and since late 2017, sticker-shocked payers have been raising barriers on its use, which hasn't been a good thing for sales.
Instead of growing, the drug started treading water, hovering just above $1 billion. 2019 could be worse—for the first six months of the year, the drug posted $490 million, compared with $537 million in the same period last year.
Meanwhile, Mallinckrodt has been spending money to wrap up legal problems only to have new ones sprout.
In June, Mallinckrodt settled with the U.S. Department of Justice for $15.4 million on claims its Questcor business 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.
That settlement––in which Mallinckrodt admitted no wrongdoing––was only the latest in the drugmaker's Questcor headache, and more pain could be on the way. On the same day the $15.4 million deal was announced, the DOJ said it would pursue new charges against Mallinckrodt in an alleged charities kickback probe that has snagged some major players in the industry.
The DOJ said the charities kickback scheme, in which Questcor allegedly funneled funds through front charities to subsidize patient copays, occurred at the same time Questcor boosted the price of Acthar more than 85,000% between 2001 and 2017.
Mallinckrodt has argued that the vast majority of those increases occurred prior to its purchase of Questcor, but the drugmaker chose to keep Acthar's price as is after it closed the deal, and it has instituted what it calls routine price increases since then.
“Mallinckrodt is proud of Acthar Gel and the important advancements that the product has made, both commercially and clinically over the last several years," the company said. "On a daily basis, an increasing number of patients' lives are positively impacted by this drug, particularly underserved individuals with very serious medical conditions for whom other treatment options have failed."
That's not the end of the legal headache, however. Back in early 2017, Mallinckrodt opted to pay $100 million to settle Federal Trade Commission claims that Questcor bought out Synacthen Depot, a potential Acthar rival, in 2013 with the intent of shelving the challenger and boosting Achtar's price.
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, the FTC said.
And those settlements could be just the tip of the iceberg: In August, Humana said Questcor's combined campaign to pay patient and doctor kickbacks and stifle competitors defrauded the insurer of $700 million in Medicare rebates.
Taken alongside the drugmaker's potential opioid legal overhang, Mallinckrodt has put on hold a plan to spin off its specialty generics products, including oxycodone, active pharmaceutical ingredients and constipation drug Amitiza. What's left over—the company's specialty brands, including Acthar—would operate under a new, as-yet-undetermined name and without the burden of potentially hefty opioid liabilities.