Biotech and Pharma

Pharmaceutical company Mallinckrodt expects to pay $15 million to settle DOJ drug bribing probe

Key Points
  • Mallinckrodt says it expects to pay $15.4 million to the DOJ to settle a drug bribery case.
  • Two whistleblower lawsuits claim Questcor, which it acquired in 2014, improperly marketed and bribed doctors to prescribe its popular drug H.P. Acthar Gel.
HP Acthar made by Mallinckrodt Pharmaceuticals is an anti-inflamatory medicine used by multiple sclerosis patients.
Source: Mallinckrodt Pharmaceuticals

Shares of pharmaceutical company Mallinckrodt seesawed Wednesday after it announced a tentative deal with the U.S. Justice Department to settle a drug bribery probe into Questcor Pharmaceuticals, which it acquired in 2014.

Mallinckrodt said it expects to pay $15.4 million to the DOJ after two whistleblower lawsuits claimed Questcor improperly promoted and bribed doctors to prescribe its popular drug H.P. Acthar Gel. The suits also claimed Questcor defrauded Medicare by illegally marketing the drug, which is used for treating multiple sclerosis and seizures in children.

The terms of agreement have yet to be finalized and do not admit wrongdoing on the company's part. The company said the agreement does not cover allegations relating to Questcor's charitable foundation activities, only the company's sales and marketing activities.

The government is still seeking unspecified monetary damages from Mallinckrodt related to alleged improper conduct at a Questcor charitable foundation between 2010 and 2014, the company said. The government accused Questcor of using a foundation as a "conduit" to pay illegal kickbacks in the form of co-pay subsidies to market Acthar as "free" to doctors and patients, despite raising its price.

"Illegal inducements increase the costs paid by the American taxpayer and distort the market forces that otherwise could control those costs," Assistant Attorney General Jody Hunt of the DOJ's Civil Division said in a statement. "This lawsuit and prior enforcement actions make clear that the department will hold accountable drug companies that pay illegal kickbacks to facilitate increased drug prices."

The company's shares jumped as much 8.5% on the news before tumbling by more than 3% in intraday trading.

Mallinckrodt General Counsel Mark Casey said in a statement that the company looks forward to finalizing its agreement with the government relating to Questcor's sales and marketing activities.

"As we have said repeatedly, where we can resolve legacy legal matters in a reasonable and manageable way, we will do so," Casey said in a statement. "Unfortunately, that has not been possible to date regarding the allegations relating to Questcor's charitable foundation activities, despite what we believe was lawful and appropriate activity. We are confident that the litigation process will focus the contested issues and be a productive step in reaching resolution."

H.P. Acthar Gel accounted for 35% of Mallinckrodt's net sales in 2018. The drug is known for its sharp price hike in 2007. That year Questcor raised the price of one vial of the medicine to $28,000 from $2,000 — it now costs nearly $39,000.