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Maker of $34,000-a-vial drug to pay $100 million for allegedly preventing competition

(Rachel Orr/The Washington Post)
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This story has been updated.

Mallinckrodt Pharmaceuticals company has agreed to pay $100 million to settle a lawsuit alleging that a company it acquired in 2014 engaged in anti-competitive behavior to preserve its monopoly on a $34,000-a-vial infantile spasm medicine.

The allegations, brought by the Federal Trade Commission and attorneys general from five states, center on H.P. Acthar Gel, a rare-disease drug that currently has “limited direct competition,” according to a regulatory filing by the company. Acthar Gel, which once sold for $40 a vial, was acquired by Questcor Pharmaceuticals in 2001 for $100,000 plus royalties according to the lawsuit. Questcor — which was acquired by Mallinckrodt in 2014 — then raised the list price of the drug, ultimately to more than $34,000 a vial. The drug brought in more than $1 billion in U.S. revenue in 2015 for Mallinckrodt, according to the legal complaint.

The proposed court order announcing the settlement states that it “does not constitute . . . any admission of liability or wrongdoing” by Mallinckrodt.

"We continue to strongly disagree with allegations outlined in the FTC's complaint, believing that key claims are unsupported and even contradicted by scientific data and market facts, and appear to be inconsistent with the views of the FDA," Mallinckrodt said in a statement on its website.

While big price hikes on old drugs have garnered lots of public and political scrutiny, the Acthar hike alone — an 85,000 percent increase in price — wasn't the primary focus of the federal and state investigations. Instead, the case highlights one avenue by which drug companies that engage in price hikes can, allegedly, attempt to protect those increases from competition.

“Questcor took advantage of its monopoly to repeatedly raise the price of Acthar,” Edith Ramirez, chairwoman of the Federal Trade Commission, said in a statement. “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.”

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In countries outside the U.S., Novartis sold a drug very similar to Acthar Gel, called Synacthen Depot. The drugs are not identical, but Synacthen has been used to treat patients with infantile spasms and other similar conditions for decades, according to the lawsuit. When Novartis decided to sell the U.S. rights to the drug, the sale represented a “nascent competitive threat” to Acthar, the lawsuit states — even though it was not yet approved as a treatment in the U.S. Questcor outbid several other companies in a deal worth at least $135 million.

As part of the settlement, Mallinckrodt also agreed to license Synacthen to a competitor approved by the FTC.

The FTC was joined by the attorneys general of Alaska, Maryland, New York, Texas and Washington in its suit.

The company argued in its statement that the resources necessary to develop Synacthen in the U.S. would be considerable and pointed out that trials could be difficult to conduct because patients would have to forego a known treatment, Acthar.

In an ironic twist, Questcor outbid several companies for Synacthen — including Retrophin, a pharmaceutical company that was founded by Martin Shkreli, the former pharmaceutical executive best known for a big price hike on a different drug, Daraprim. Retrophin later sued Questcor alleging that the move “preserved and entrenched” its monopoly. That lawsuit settled for $15.5 million.

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