Mallinckrodt Will Pay $100 Million to Settle Price-Hike Suit

  • Questcor unit increased cost of rare drug by 85,000 percent
  • Company later bought rights to competing drug from Novartis

Irish drugmaker Mallinckrodt Plc agreed to pay $100 million to settle claims that its U.S. unit illegally boosted the price of a rare autoimmune drug by 85,000 percent and bought the rights to a much-cheaper competitor to keep it out of the American market.

The unit monopolized the market for years to increase sales of its H.P. Acthar Gel, typically used to treat multiple sclerosis, infantile spasms and other life-threatening diseases, the Federal Trade Commission said Wednesday in a statement. Mallinckrodt must also license the rights to the cheaper drug to a competitor for eventual sale in the U.S., the FTC said.

Mallinckrodt’s shares fell 5.9 percent to $46.53 in New York, after declining as much as 14 percent.

“We are pleased to confirm that we have entered into a settlement agreement with the FTC staff to fully resolve this matter,” Mallinckrodt said in a statement.

Best Seller

Acthar was Questcor’s best-selling drug in 2013, accounting for 95 percent of the company’s $798.9 million in net sales the year before its purchase by Mallinckrodt, according to a regulatory filing.

“This is an egregious case of a monopolist doing a deal to eliminate potential competition and keep its power over pricing," New York Attorney General Eric Schneiderman said in a statement. “This settlement will restore the competition."

The illegal behavior started at Questcor Pharmaceuticals Inc. as early as 2001 and was perpetuated by Mallinckrodt when it bought Questcor in 2014 for $5.6 billion, according to the statement. Mallinckrodt and Questcor, now known as Mallinckrodt ARD Inc., struck the deal with attorneys general in New York, Alaska, Maryland, Texas and Washington, as well as with the FTC.

The five states will each receive $10 million from the settlement, with $2 million set aside for attorneys’ fees, the FTC said.

Costly Shift

Questcor bought the rights to Acthar in 2001 -- the only such drug sold in the U.S. --  and then increased the price for one vial to more than $34,000 from $40, according to the statement. It then monopolized the market starting in 2012 by purchasing the rights to a similar drug, Synacthen, which was being sold by Novartis AG in Europe and Canada at a fraction of the price.

Questcor, which viewed Synacthen "as a significant competitive threat" to its U.S. sales, offered Novartis $135 million for the drug, outbidding at least three other companies that had plans "to sell it at a significant discount" to eat away at Questcor’s business, the FTC said.

Under the deal, Mallinckrodt must license the rights to Synacthen to a competitor to commercialize and develop the drug in the U.S., including its trademark, clinical trial data and other intellectual property related to its production, according to Schneiderman’s statement.

— With assistance by Michelle Cortez

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