Life Science Compliance Update

August 01, 2017

Mallinckrodt Settles Anti-Competitive Practices Suit

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Mallinckrodt and the Federal Trade Commission (FTC) recently agreed to settle allegations of raising drug prices and engaging in anti-competitive practices by paying a $100 million fine and allowing a competitor to produce a similar medication. The drug, H.P. Acthar Gel, is used to treat infantile spasms and multiple sclerosis. Mallinckrodt allegedly raised the price of the prescription from $40 per vial to over $34,000 per vial.

According to New York Attorney General Eric Schneiderman’s office, Mallinckrodt’s United States subsidiary (Questcor) purchased the drug in 2001 and raised the price an estimated 85,000% over the course of time. The complaint filed by the government and three state attorneys general further alleges Questcor thwarted attempts by competitors to introduce similar drugs into the marketplace by constantly out-bidding them in attempts to acquire Synacthen – a drug used to treat the same conditions.

In addition to paying the fine, Mallinckrodt will license Synacthen to Marathon Pharmaceuticals for infantile spasms and nephrotic syndrome, two FDA-approved uses of Acthar. However, Mallinckrodt will retain the right to the drug for other indications, such as Duchenne muscular dystrophy.

FTC Chairwoman Edith Ramirez released a statement, saying, “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% increase. 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.”

AG Schneiderman stated, “This is an egregious case of a monopolist doing a deal to eliminate potential competition and to keep its power over pricing. This settlement will restore the competition that was prevented by Questcor’s illegal actions.”

In response to the settlement, Mallinckrodt released a statement, “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.”

In an investor note, Wells Fargo analyst David Maris said the settlement news “was not as bad as some had initially feared, and we are not sure it qualifies as bad news in the final analysis. The $100 million payment won’t be difficult for Mallinckrodt to bear, Maris figures, and developing Synacthen in infantile spasms and nephrotic syndrome will take years of work.

“To us, the news of a settlement is much better than the initial ominous-sounding headlines that came across about pending charges,” Maris wrote, adding, “We believe there are a lot of risks associated with developing Synacthen for Acthar indications, and as such, we doubt that even if successful, we will see any Synacthen-related approvals for possibly 7-plus years.”

May 25, 2017

Citizen Petitions to Come Front and Center

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In February, the Federal Trade Commission filed a complaint in federal district court charging Shire ViroPharma Inc. with violating the antitrust laws by abusing government processes to delay generic competition to its branded prescription drug, Vancocin HCl Capsules. The complaint alleges that because of ViroPharma’s actions, consumers and other purchasers paid hundreds of millions of dollars more for their medication.

FTC has been looking for similar case

Congress amended federal law in 2007 in the hopes of curbing underhanded petitions. It authorized the FDA to flatly reject petitions that clearly don’t raise legitimate issues, and told the FDA not to delay generics unless public health would be jeopardized.

But it’s not clear that the action worked as intended. In a report to Congress last year, the FDA said it “continues to be concerned that [the amendment] may not be discouraging the submission of petitions that are intended primarily to delay the approval of competing drug products and do not raise valid scientific issues.”

As was reported, Wilson Sonsini Goodrich & Rosati PC partner Seth Silber, a former FTC lawyer, told Law360 that the ViroPharma case represents the culmination of the commission’s years long interest in challenging flimsy petitions.

“I think the FTC, probably from that time [of Congress’ amendment] to present, has been looking for a good case,” Silber said. “They obviously thought they had a good fact pattern.”

What is a citizen petition?

A citizen petition is a request for the FDA to take an action such as evaluating a drug’s safety or effectiveness. When used appropriately, it could raise awareness of legitimate concerns with a drug. But when used inappropriately, it could extend the brand firm’s monopoly by delaying FDA approval of generic drugs. This delay could result in literally millions of dollars a day being transferred from consumers to drug companies

FTC argument

The FTC alleges that to maintain its monopoly, ViroPharma waged a campaign of serial, repetitive, and unsupported filings with the US Food and Drug Administration and courts to delay the FDA’s approval of generic Vancocin Capsules, and exclude competition. According to the FTC, ViroPharma submitted 43 filings with the FDA and filed three lawsuits against the FDA between 2006 and 2012.

The number and frequency of ViroPharma’s petitioning at the FDA are many multiples beyond that by any drug company related to any other drug. ViroPharma knew that it was the FDA’s practice to refrain from approving any generic applications until it resolved any pending relevant citizen petition filings. ViroPharma intended for its serial filings to delay the approval of generics, and thus competition and lower prices.

Shire response

The company notes it acquired ViroPharma in January 2014, and divested Vancocin in August 2014. The Company played no role in ViroPharma’s challenged petitioning, which took place between 2006 and 2012. Shire believes the FTC’s challenge to ViroPharma is wholly without merit, and will vigorously defend these claims. ViroPharma’s actions were in furtherance of its fundamental right to petition the government, which is guaranteed and protected by the First Amendment, and raised legitimate issues with the U.S. Food and Drug Administration (“FDA”) involving complex scientific questions that had significant public health implications.

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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