Relevant Document:Agenda
Judge John Dorsey issued an oral ruling sustaining the Mallinckrodt debtors’
objections to the
administrative Acthar antitrust and RICO claims of Humana and Attestor this morning, ending a
months-long dispute that
threatened to derail the debtors’
reorganization. Judge Dorsey concluded that the claimants failed to carry their burden to prove that the company’s conduct, rather than regulatory obstacles, prevented competition and pricing pressure on the debtors’ best-selling drug.
Reorg’s live blog coverage of the oral ruling can be accessed through the live blog portal
HERE (when logged in to Reorg).
According to the judge, the list price of Acthar rose from about $1,000 per vial in 2003 (when it was acquired by Questcor, which was acquired by Mallinckrodt in 2014) to $40,000 per vial in 2019. However, Judge Dorsey said, charging a high price for a drug is not, in and of itself, illegal, and absent sufficient evidence of some illegal activity, a manufacturer is free to charge whatever the market will bear.
The insurance claimants argued that Questcor and then Mallinckrodt violated federal antitrust law by acquiring and shelving Synacthen, a potential synthetic competitor to Acthar. Judge Dorsey acknowledged that prior to acquiring Questcor for $5.8 billion, Mallinckrodt’s investment bankers mentioned the “defensive” nature of the Synacthen acquisition, and the judge cited internal Mallinckrodt correspondence indicating that U.S. Food and Drug Administration approval of Synacthen could dent Acthar sales.
However, the judge concluded that the absence of competition for Acthar was in fact caused by FDA regulatory difficulties rather than any conduct by Mallinckrodt. The debtors’ ownership of intellectual property relating to Synacthen, the judge said, did not prevent other manufacturers from developing a synthetic Acthar competitor because Synacthen is not patented and its active ingredient is widely available. Despite that, Judge Dorsey found, competitors failed to secure FDA approval for a synthetic Acthar competitor.
The judge pointed out that after a $100 million settlement with the U.S. Federal Trade Commission in 2017, the debtors sublicensed Synacthen to a competitor, but the competitor subsequently abandoned pursuit of FDA approval for the drug for the same indications as Acthar. Judge Dorsey also noted that on Nov. 1, ANI
secured FDA approval for a non-synthetic alternative to Acthar.
The insurance claimants also argued that the debtors violated federal RICO and anti-kickback statutes by providing unlawful copay assistance for Acthar purchases and paying physicians improper speaking fees. Judge Dorsey acknowledged that these measures may have increased Acthar sales. However, the judge concluded that any increase in Acthar sales as a result of this conduct established “correlation” but not “causation.”
The insurance claimants, Judge Dorsey found, failed to provide any evidence that the debtors violated their internal policies or applicable law governing copay assistance or speaker fees. With respect to speaker fees, the judge added that the claimants failed to offer any evidence that a physician prescribed Acthar “against their better judgment” as a result of those fees.
Judge Dorsey noted that information regarding the debtors’ payment of speaker fees was available to the insurers, and they could have declined to approve payment for Acthar prescriptions written by speakers - but never did. Nor did the insurers conduct an audit of the debtors’ speaker fee compliance policies, the judge pointed out.