Life Science Compliance Update

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January 31, 2017

Mallinckrodt to Pay $100M to Settle Antitrust Violations

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Mallinckrodt ARD Inc., formerly known as Questcor Pharmaceuticals, Inc., and its parent company, Mallinckrodt plc, have agreed to pay $100 million to settle Federal Trade Commission (FTC) charges that they violated antitrust laws when Questcor acquired the rights to a drug that threatened its monopoly in the United States market for adrenocorticotropic hormone (ACTH) drugs. The drug, Acthar, is used as a treatment for infantile spasms, as well as a drug of last resort for other serious medical conditions. A treatment with Acthar can cost more than $100,000.00.

The complaint alleges that, while benefitting from an existing monopoly over the only U.S. ACTH drug, Acthar, Questcor illegally acquired the U.S. rights to develop a competing drug, Synacthen Depot. The acquisition stifled competition by preventing any other company from using the Synacthen assets to develop a synthetic ACTH drug, preserving Questcor’s monopoly and allowing it to maintain extremely high prices for Acthar.

The FTC alleges that in June 2013, Questcor acquired the U.S. rights to Synacthen from Novartis AG, outbidding several other companies that were seeking to acquire the rights to Synacthen. Those alternative bidders were interested in developing the drug and had plans to sell it at a significant discount to Acthar’s price, capturing a substantial amount of Questcor’s business. The FTC charges that Questcor’s acquisition of Synacthen stifled competition and eliminated the possibility that an alternative bidder would make the drug available in the U.S. market and compete with Acthar.

“Questcor took advantage of its monopoly to repeatedly raise the price of Acthar, from $40 per vial in 2001 to more than $34,000 per vial today – an 85,000 percent increase,” said FTC Chairwoman Edith Ramirez. “We charge that, to maintain its monopoly pricing, it acquired the rights to its greatest competitive threat, a synthetic version of Acthar, to forestall future competition. This is precisely the kind of conduct the antitrust laws prohibit.”

In addition to the $100 million monetary payment, the proposed stipulated court order requires that Questcor grant a license to develop Synacthen Depot to treat infantile spasms and nephrotic syndrome to a licensee approved by the Commission.

A monitor will ensure that Questcor complies with its obligation to grant the license within 120 days of the entry of the order; after that time, a trustee will be appointed to effectuate the license. The order also requires Questcor to provide periodic reports on its efforts, and provide the Commission with advance notice of any future acquisitions of U.S. rights to ACTH drugs.

Shkreli Resurfaces…

The FTC has been investigating Mallinckrodt's Questcor unit since a 2014 lawsuit filed by notorious ex-pharmaceutical executive Martin Shkreli, then CEO of drug maker Retrophin.

Retrophin's suit claimed Questcor violated federal antitrust laws by purchasing Synacthen from Novartis for $135 million after Retrophin bid $16 million for the drug. Retrophin claimed Questcor's purchase was illegal because it was allegedly done to shut down a drug that could compete with Achthar.

Retrophin settled its case against Questcor in 2015 after Questcor paid Retrophin $15.5 million.

Conclusion

The states of Alaska, Maryland, New York, Texas, and Washington joined in the FTC’s complaint. Under the settlement, the states will receive $10 million from the $100 million judgment and an additional $2 million as payment for attorney’s fees and costs.

In a statement issued Wednesday, Mallinckrodt said, "We are pleased to confirm that we have entered into a settlement agreement with the FTC staff to fully resolve this matter, subject to approval by the commission. We will comment further at the appropriate time."

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