Mallinckrodt just got its hand slapped for illegally protecting an 85,000% price hike

The view from Endpoints

More than three years ago, Questcor paid Novartis $135 million to gain US rights to a therapy that posed a direct threat to its Acthar drug franchise. It was the deal of the decade, blocking a competitor that could have carved into a blockbuster franchise. Andrew Pollack at The New York Times laid it all out in simple terms in a venue that no one who cared about drug pricing could have missed.

There was also no doubt what the deal on Synacthen Depot — a synthetic version of Acthar — meant to Questcor, which had been jacking up the price of Acthar by an astronomical amount that helped justify Mallinckrodt’s $5.6 billion acquisition a year later. Its stock jumped 15% when the news came down.

“We believe the acquisition removes a key overhang as a potential competitor to Acthar is removed,” noted analyst Biren Amin at the time.

Over 15 years the price on Acthar has gone up 85,000%, according to the FTC, which just won a $100 million settlement from Mallinckrodt for illegally maintaining a drug monopoly. To put that settlement in perspective, it’s the about same amount as the annual increase of Acthar net sales in fiscal 2016, when the drug earned $1.16 billion — making it easily the biggest drug in their portfolio.

When Mallinckrodt bought Questcor, Acthar cost $28,000 a vial. Today, a little more than two years later, the FTC says it’s $34,000 a vial.

Mallinckrodt, for its part, has been scrambling to shed a rep as a price grouting biopharma company, joined the pricing pledge that Allergan’s Brent Saunders started, vowing to keep annual price hikes to single digits.

That would still allow a price hike on Acthar that would equal what the FTC is getting in the settlement.

The company is also swearing to double its R&D budget, which hit $262 million in its last fiscal year.

Perhaps the biggest penalty the company faces is an order to sell the license on the competing therapy in a matter of months. That supervised transaction will set up an eventual competitor, but it will not necessarily do anything to significantly reduce the price of the therapy, as even a discount sticker could still command a price wildly higher than the old list price for Acthar.

Development also can take time, and the agreement does nothing immediate to reduce the cost of the drug.

Ironically, Martin Shkreli is getting credit as the whistle blower in the case, which occurred when short sellers were trying everything to topple Questcor’s stock price. (Shkreli’s Retrophin was outbid on the Novartis drug, which he had his own plans for.) Shkreli knows a thing or two about price gouging on old drugs, which he practiced at Retrophin and Turing. He’s now primarily occupied with a federal fraud case, which is coming up for trial this summer.

But the federal case has nothing to do with price gouging Daraprim or any other drug. Shkreli’s 5,000% price hike remains in force, as it was completely legal. And he continues to seek out high profile interviews that allow him to defend the price.

For now, gouging remains a lucrative and largely non-threatening endeavor which the feds have little power to control. It remains to be seen if new incoming Trump administration will change that. PEOTUS famously accused pharma companies with “getting away with murder” on drug prices.

Mallinckrodt and the FTC helped make that case for him.

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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