Mallinckrodt to settle U.S. drug marketing probe, fight kickback case

Mallinckrodt Plc on Wednesday said it had tentatively agreed to pay $15.4 million to resolve a U.S. Justice Department probe into how a drugmaker it now owns marketed an expensive treatment for a rare infant seizure disorder and multiple sclerosis.

But Mallinckrodt said it would fight new claims by the department contained in the complaint filed on Tuesday in federal court in Philadelphia that it improperly used a charity to pay kickbacks aimed at encouraging Medicare patients to use the drug.

The department alleged that the drugmaker from 2010 to 2014 used a patient assistance charity as a conduit to improperly subsidize Medicare patients' copayment obligations, allowing the company to keep raising prices for the drug, H.P. Acthar Gel.

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"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," Assistant Attorney General Jody Hunt said in a statement.

Drug companies are prohibited from subsidizing copayments for patients enrolled in the government's Medicare healthcare program for those aged 65 and older. Companies may donate to non-profits providing copay assistance as long as they are independent.

In March the department joined a pair of whistleblower lawsuits that alleged Questcor Pharmaceuticals, which Mallinckrodt acquired in 2014, defrauded government healthcare programs by illegally marketing Acthar.

The Justice Department said the price of the drug had spiked in the years since Questcor acquired it in 2001 from about $50 per vial to $32,200 in 2014. Mallinckrodt said the drug's price today is $38,892 per vial.

Last year, Acthar represented 35% of Mallinckrodt's $3.2 billion in net sales.

Mallinckrodt said its agreement-in-principle to resolve the department's marketing investigation is subject to finalization and contains no admission of wrongdoing. But it said the company believed its actions related to the charity were lawful.

"We are confident that the litigation process will focus the contested issues and be a productive step in reaching resolution," Mark Casey, Mallinckrodt's general counsel, said in a statement.

Mallinckrodt shares fell 2.6 percent to $9.46.

The case is U.S. ex rel Strunck v. Mallinckrodt ARD LLC, U.S. District Court, Eastern District of Pennsylvania, No. 12-cv-175.