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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