The US government has filed a lawsuit against Mallinckrodt, claiming that the drugmaker defrauded Medicaid by underpaying rebates owed to the federal health insurance system.
The complainant says that Mallinckrodt understated the rebates it was due to pay Medicaid over a period in which it raised the price of its $40,000-per-vial Acthar (corticotropin) product, and as a result the company “knowingly underpaid hundreds of millions of dollars at the expense of American taxpayers”.
Medicaid rules say that when the price of a drug increases dramatically the company is supposed to pay back to Medicaid, in the form of rebates, the price above the inflation rate. A manufacturer must pay a rebate that is based on the drug’s price since 1990 or when it was first marketed, whichever date is later.
The Department of Justice is claiming that Mallinckrodt began calculating and paying rebates as if Acthar was a new drug first marketed in 2013, ignoring $20,000 in price increases since 1990 when the Medicaid programme came into effect.
It also says that Mallinckrodt had ignored repeated warnings by the Centers for Medicare and Medicaid Services (CMS) that it had to factor in the pre-2013 price increases when calculating its rebate obligations.
Acthar has been on the market since the 1950s as a treatment for rheumatoid arthritis, but saw its price per vial increase from $50 to almost $40,000 over the years thanks to new indications, including a 2010 approval – under a New Drug Application – for the treatment of infantile spasms, an extremely rare, potentially fatal form of epilepsy.
The NDA approval was awarded to Acthar’s earlier owner Questcor, which was acquired by Mallinckrodt for $5.6bn in 2014.
The federal lawsuit follows civil actions over Acthar, including a complaint filed by US health insurer Humana last year that claims it was overcharged for the drug to the tune of $700m as a result of “eye-popping price increase” as well as “monopoly, bribery, racketeering, fraud and other deceptive and unfair practices”.
The lawsuit adds to the pressure on Ireland-domiciled Mallinckrodt, which is already financially challenged as it has just agreed a tentative $1.6bn deal with US states and territories to settle claims that it had a hand in fuelling the opioid epidemic in the US.