Drugmaker's Stock Tumbles Amid Dispute Over Rebates


Mallinckrodt warned that it might need to provide as much as $600 million in retroactive rebates.

Mallinckrodt PLC lost nearly one-quarter of its stock-market value Tuesday after the drugmaker said a dispute with health regulators might cost it hundreds of millions of dollars and reduce future sales for one of its top selling products.
 The company said the Centers for Medicare and Medicaid Services has determined it has to pay additional money to states related to Acthar, an injected product used to treat multiple sclerosis, infantile spasms and other conditions.
 If regulators consider the company noncompliant with rules governing an outpatient prescription-drug-rebate program, Mallinckrodt said it might have to provide as much as $600 million in retroactive rebates.
 The decision from the Medicaid and Medicare regulator could dent Acthar sales by 10% each year, the drugmaker said, placing at risk its prior guidance of generating more than $1 billion in net sales from the treatment this year. Acthar accounted for one-third of Mallinckrodt's $3.22 billion in net sales last year.
 On Monday, a Mallinckrodt subsidiary sued leaders of the Centers for Medicare and Medicaid Services and the Department of Health and Human Service, in the District of Columbia federal court, seeking to reverse the Medicaid regulator's decision regarding Acthar. “CMS is reviewing the lawsuit and determining next steps,” a spokesman for the agency said.
 Regulators approved Acthar for sale in the U.S. in 1952 and have subsequently expanded the range of ailments the drug can be used to treat. Mallinckrodt said in 2012 federal regulators determined that Acthar—then owned by Questcor Pharmaceuticals, a company Mallinckrodt bought five years ago—was eligible for a new “base date” price.
 The base-date price is critical for drugmakers because it helps determine how much firms must pay states when a therapy is prescribed to people covered by Medicaid, according to Mallinckrodt.
 Federal regulators told Mallinckrodt this month that it must start using an older base-date price for Acthar by May 24 or the company will be listed as noncompliant with reporting requirements under the Medicaid drug-rebate program. Shares in Mallinckrodt fell 24% to $9.87, and are down 38% so far this year.
 Mallinckrodt's bonds also plunged Tuesday, with the 4.75% bonds due April 2023 falling deeper into distressed territory. Those bonds, with about $500 million outstanding, lost almost 11 points, to 62.5 cents on the dollar, according to MarketAxess.
 Before Mallinckrodt bought Questcor, that company told regulators it was “losing money” by participating in the Medicaid-rebate program for Acthar, according to Mallinckrodt's suit.
 Mallinckrodt is committed to ensuring low-income Medicaid patients have access to Acthar, according to a spokesman for the company.
 In April, the Justice Department said it would intervene in lawsuits that claimed Questcor paid kickbacks to doctors for prescribing Acthar.
 Mallinckrodt said then it was cooperating with the federal government and had been in settlement talks over that issue. It said it disagreed with the substance of the legal complaints. A spokesman had no further comment on that matter Tuesday.  

BY MICAH MAIDENBERG

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