Life Science Compliance Update

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."

October 15, 2015

Senator Klobuchar Calls on FTC To Investigate Pharma Companies for Antitrust Violations in Wake of Turing Case

  Klobacher

Last week, U.S. Senator Amy Klobuchar (D-MN) called on the Federal Trade Commission (FTC) to investigate pharmaceutical companies for possible antitrust violations. What spurred her interest? “Turing Pharmaceuticals recently increased the price of an infectious disease drug by 5,000 percent,” stated Klobuchar, and “there are reports that Turing and other pharmaceutical companies could be restricting drug distribution in violation of antitrust laws.”  

Background

While drug pricing has been a newsworthy topic over the last year, the past few weeks have been especially brutal for the pharmaceutical industry's reputation. On September 20, the New York Times wrote an article entitled "Drug Goes From $13.50 a Tablet to $750, Overnight." The drug Daraprim is used to treat toxoplasmosis, an infection caused by a parasite,  and was acquired  by Turing, a start-up run by a former hedge fund manager, noted the article. "Turing immediately raised the price to $750 a tablet from $13.50, bringing the annual cost of treatment for some patients to hundreds of thousands of dollars," the article stated. A media frenzy ensued, capped by Hillary Clinton's announcement to move forward on an official drug pricing policy.  

The company's chief executive, Martin Shkreli, defended his company's decision: "the drug was unprofitable at the former price, so any company selling it would be losing money. And at this price it's a reasonable profit. Not excessive at all," he stated in a CBS News interview. "This is a disease where there hasn't been one pharmaceutical company focused on it for 70 years. We're now a company that is dedicated to the treatment and cure of toxoplasmosis. And with these new profits we can spend all of that upside on these patients who sorely need a new drug, in my opinion," he added.

Shkreli has since pedaled back on the price after initially defending the company's decision and weathering an onslaught of criticism, but the widespread coverage and backlash has already been enough to cause serious discussion about drug cost measures among Democratic presidential candidates in this election cycle. In fact, Bernie Sanders wrote a letter to Shkreli calling him to provide more information on the price hike. (See Sanders' September 21 letter). 

Klobuchar Joins The Ring

Now, Senator Klobuchar has called on the FTC to investigate the issue. “There are reports that Turing and other pharmaceutical companies could be restricting drug distribution in a manner that violates the antitrust laws established in the Federal Trade Commission Act,” she states.   

“Some companies may be combining a substantial price increase for a prescription medication with a closed distribution system,” Klobuchar wrote to the FTC. “If the restricted distribution prevents or delays generic competition, it could subject consumers to unnecessarily high prescription drug prices. We urge you to investigate whether companies are using restricted distribution in a manner that violates the Federal Trade Commission Act. This issue is extremely important to consumers; access to affordable drugs and in particular generics is a necessary element of affordable health care.”

 

The full text of Senator Klobuchar’s letter to FTC Chairwoman Edith Ramirez is below:

 

Dear Chairwoman Ramirez:                                                                                 

 

            We are writing to you regarding a troubling practice that may be harming American consumers. For years, some companies have purchased older drugs and imposed substantial price increases. Some companies may be combining a substantial price increase for a prescription medication with a closed distribution system. If the restricted distribution prevents or delays generic competition, it could subject consumers to unnecessarily high prescription drug prices. We urge you to investigate whether companies are using restricted distribution in a manner that violates the Federal Trade Commission Act.

 

As a public policy matter, this practice is disturbing, but as you know, the antitrust laws do not apply to unilateral price increases, no matter how unfair. Turing Pharmaceuticals’ 5,000 percent price increase on Daraprim, from which they have retreated, is the most recent example of this disturbing trend.

 

Such price increases could convince another company to seek approval for a generic version, enter the market, and lower the price for the product. This is how the free market is supposed to work. To conduct the necessary tests to receive approval from the Food and Drug Administration, a generic company would need a limited amount of the branded product. According to press reports, Turing, and perhaps others, are restricting distribution of their product. If a company were to employ this strategy to deny competitors supply for use in a generic application, it would be doing more than simply raising prices. It could be excluding competition from the market to the detriment of consumers and violating the Federal Trade Commission Act.

 

This issue is extremely important to consumers; access to affordable drugs and in particular generics is a necessary element of affordable health care. We believe there is sufficient concern for the Federal Trade Commission to thoroughly investigate whether Turing or any other pharmaceutical company has used restricted distribution practices to insulate a price increase from competition. 

 

 

August 27, 2015

FTC Urges FDA To Reevaluate Current Approach To Regulating Homeopathic Drugs

Homeopathy

Last week, the Federal Trade Commission (FTC) recommended that the Food and Drug Administration (FDA) consider regulating homeopathic products more like other pharmaceuticals. The recommendation is in response to FDA’s call for input on how it regulates homeopathic products—the first time in 25 years they have done so since releasing the guidance document “Conditions Under Which Homeopathic Drugs May be Marketed.” The FDA has not scrutinized homeopathic products for safety or efficacy as it does with other conventional products. They can be sold over the counter (OTC) for "self-limiting" conditions, like headaches or colds, which go away on their own. However, things have changed since 1988 when homeopathic remedies were offered by a limited number of manufacturers. Today, the homeopathic market is a $3 billion industry, and, as FTC indicates in their comment, these products may confuse consumers into believing that they are subject to the same strict approval standards as other drugs.  

As a background, homeopathy was developed in the 18th century and based on the idea that a product that causes an illness can also treat that same illness when taken in a highly diluted dose. “[H]omeopaths claim that a substance becomes more potent the more it becomes diluted by intense shaking” in a process known as “succussion,” indicates Forbes. However, in some cases the mixtures are so highly diluted that no molecules of the chemical remain in the final product. “Scientists now agree—overwhelmingly—that the remedies don't work,” states a recent article in Bloomberg. “But each year, billions of dollars worth of homeopathic products are sold in the U.S.” Oftentimes these products are sold right next to pharmaceutical products, with little noticeable differentiation to consumers looking for treatment.

Back in March, the FDA stated that it was “evaluating its current enforcement policies for drug products labeled as homeopathic from scientific, risk, and process perspectives.” The agency noted it was “now soliciting opinions about whether and how to adjust the current enforcement policies to reflect changes in the homeopathic product marketplace over the last approximately 25 years.”

Last week, FTC, which acts as the government’s consumer watchdog, took the opportunity to provide their recommendation that FDA should revise or repeal its current regulations for homeopathic products. This is a noteworthy comment; as Bloomberg notes, “Federal agencies don't normally tell each other how to do their jobs.”

FTC indicated that FDA's current approach to homeopathic products may conflict with advertising regulations, which often align well with FDA requirements, that require advertisers to have “competent and reliable scientific evidence” for any claims related to health, safety or efficacy. “Neither the FTC Act, nor any FTC rule or policy statement, exempts advertising claims for homeopathic drugs from these standards,” the FTC wrote in its comment.

Further, FTC offered evidence that consumers are confused about the evidentiary or approval requirements for traditional pharmaceuticals compared to homeopathic products, and this confusion is magnified when the products are side-by-side in the store. Forbes writer David Kroll notes that homeopathic products “can confuse consumers because they make disease treatment claims but then carry, in very small print, the disclaimer that, ‘These statements have not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure or prevent any disease.’”

In addition to consumer confusion, FTC also points to issues with advertisers "mistakenly" believing that compliance with FDA's 1988 homeopathic guidance "exempts them from compliance with the FTC Act’s substantiation requirement." In fact, FTC points out that these companies may "unwittingly subject themselves to liability for injunctive and monetary remedies in an FTC enforcement proceeding."

View FTC’s full response to FDA’s request for comments on “Homeopathic Product Regulation: Evaluating the Food and Drug Administration’s Regulatory Framework After a Quarter-Century,” here.

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