Are Two of St. Louis' Biggest Companies Fleecing America?

Manufactured by one St. Louis company and distributed by another, a vial of Acthar can cost more than $40,000.
Manufactured by one St. Louis company and distributed by another, a vial of Acthar can cost more than $40,000. ILLUSTRATION BY EVAN SULT

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In 2012, two Questcor employees filed whistleblower complaints in federal court detailing the system of kickbacks and other compensation that Questcor (as well as Mallinckrodt after merging with Questcor) used to boost Acthar prescriptions. The whistleblower complaints, which were unsealed in 2019, were brought by Charles Strunck and Lisa Pratta, both of whom worked in sales for Questcor. Pratta also worked for Mallinckrodt after the merger.

Strunck and Pratta claimed that Questcor "cheated the federal government [Medicare] out of millions of dollars" through systematic kickbacks to health care providers in exchange for them promoting and prescribing Acthar.

The whistleblower complaint also claims that Questcor gave large sums of money to the nonprofit Chronic Disease Fund, which reimbursed Acthar users for their copays. On the surface, helping users pay for their medication might seem noble, but the whistleblower suit described how doing so enabled Questcor to "cheat" the taxpayers out of millions.

Americans on Medicare often pay out of pocket for a percentage of their drug costs. If patients had to pay even 5 percent of the $40,000 price for a single vial of Acthar, many would have no choice but to go without. The whistleblower suit alleged that Questcor and later Mallinckrodt used the Chronic Disease Fund to subsidize the patients' copays so they wouldn't complain about the high costs, leaving Medicare and insurance companies stuck footing the remaining tens of thousands of dollars. It's legal for a drug company to subsidize patients who have private insurance, but illegal to do so for patients on Medicare.

A ProPublica investigation found that Acthar "isn't prescribed often, just 3,387 times in Medicare in 2012. But Part D spent an average of $41,763 per prescription, making it one of the most expensive drugs around." According to government data, Medicare Part D spent $724 million on the drug in 2018.

St. Louis-based Express Scripts is the exclusive distributor for Acthar. - DOYLE MURPHY
DOYLE MURPHY
St. Louis-based Express Scripts is the exclusive distributor for Acthar.

As Acthar became prescribed more liberally, the reports of adverse side effects associated with its use increased as well. In 2017, Citron Research analyzed data from the FDA's Adverse Reporting System and found that in 2016, two years after Mallinckrodt acquired Acthar, 82 people died due to complications associated with the medication. This was up from only four deaths in 2012.

Mallinckrodt paid $100 million in a 2017 settlement to resolve Federal Trade Commission charges that the company maintained a monopoly over Acthar.

In June 2019, the Department of Justice joined the Strunck and Pratta whistleblower suits. Mallinckrodt responded to the allegations by claiming in a statement they "pertained principally to legacy Questcor conduct."

However, an article published in the Journal of the American Medical Association seems to push back against Mallinckrodt's claims that the bad behavior was a "legacy" Questcor issue. The researchers who published their work in the journal investigated the way in which Acthar was prescribed in 2015, a year after Questcor merged with Mallinckrodt. They identified 300 doctors who prescribed Acthar ten or more times over the course of that year, resulting in more than $200 million billed to Medicare (about $667,000 per doctor). More than two thirds of those so-called "frequent prescribers" received payments from Mallinckrodt that in some cases were as high as six figures. In 2016, Mallinckrodt spent more than $8 million in payments to doctors related to Acthar, according to ProPublica.

"Not one thing has changed about Acthar since the 1950s. No improvement since it was invented, since someone took the fluid from the pituitary gland of a pig and injected it into a baby. All of a sudden the growth just ballooned in 2010, 2011. The only thing that's different is the marketing," Haviland said. "And the price."

A Litany of Litigation

Over the past several years, Mallinckrodt has found itself increasingly besieged by class action lawsuits, government scrutiny and activist investors hoping to make a killing in the company's demise.

In 2017, activist investor James Chanos referred to the relationship between Mallinckrodt and Express Scripts as a "murky alliance" and, along with other investment managers, began aggressively shorting the company. Chanos is best known for predicting and profiting from the collapse of Enron and, more recently, China's Luckin Coffee.

In August 2019, health insurance company Humana sued Mallinckrodt in federal court for $700 million, calling the company's handling of Acthar "one of the most outrageous price-gouging schemes in the history of American medicine."

A month later, Mallinckrodt paid $15.5 million to resolve the DOJ's and the whistleblowers' suit.

A board of education in Maryland also filed a lawsuit similar to Rockford's against Mallinckrodt and Express Scripts over the price its health plan paid for Acthar. That case ended in a judge's dismissal "on state law grounds." The current price for a vial of Acthar varies depending on who you ask. Mallinckrodt company literature from 2019 lists it at $38,892 a vial. Other third party sources put the cost at $40,613.

In addition to battling these Acthar-related suits, Mallinckrodt has spent the last several years fending off an enormous class-action lawsuit over their production of generic opioids. Oxycontin manufacturer Purdue Pharma has taken the brunt of the bad press for its role in the opioid epidemic, but according to data from the Washington Post, Mallinckrodt actually produced more pills than Purdue.

In February, Mallinckrodt reached a tentative deal to pay $1.6 billion to the thousands of state and local governments seeking damages resulting from the opioid crisis. Mallinckrodt's beleaguered stock price rose almost 40 percent following the announcement of the settlement.

Mallinckrodt and Express Scripts' full defenses against Rockford's allegations are still unknown. But as the parties head toward trial it is certain that this will be something of a David-versus-Goliath contest. The two companies post annual revenues in the billions. Rockford's total expenditures for 2019 amounted to less than $290 million.

The case is set to be in its discovery phase until at least Thanksgiving. Judge Johnston has acknowledged the disparity of resources between plaintiff and defendant, writing that "the main defendant is a large international pharmaceutical company with substantial resources" and saying in a pre-trial hearing, "The City of Rockford is barely keeping up with what they are supposed to be doing with keeping the lights on in the streets."

Ryan Krull is a freelance journalist and assistant teaching professor in the department of communication and media at University of Missouri-St. Louis.

About The Author

Ryan Krull

Ryan Krull is a staff writer for the Riverfront Times. Find him on Twitter @ryanwkrull
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