Did Illegal Kickbacks Help Mallinckrodt Sell Acthar for Lofty $39,000?

In the face of skyrocketing drug prices, the federal government has opted to intervene in a whistleblower lawsuit against Mallinckrodt Pharmaceuticals - whose drug price increases are among the largest in U.S. history.

Did Illegal Kickbacks Help Mallinckrodt Sell Acthar for Lofty $39,000?

For years, healthcare providers have criticized the price of Mallinckrodt’s H.P. Acthar Gel (Acthar), a drug used to treat symptoms of multiple sclerosis, lupus, rheumatoid arthritis, and seizures in infants. In August 2007, the price of Acthar jumped from $1,600 to $23,000 per vial.

Cost per vial of the drug has increased from $40 to nearly $39,000 in just 19 years - nearly a 97,000% price increase. Currently, annual Acthar sales exceed $1 billion.

But how does a drug company compete in the pharmaceutical world with prices at $39,000 per vial? According to two Mallinckrodt whistleblowers, by breaking the law.

Mallinckrodt Whistleblowers Allege Illegal Bribes, Off-Label Marketing

In 2012, Charles Strunck, a former Questcor as a multiple sclerosis sales specialist, and Lisa Pratta, a former Questcor Acthar neurology specialist, filed a whistleblower lawsuit against Questcor in the U.S. District Court in the Eastern District of Pennsylvania. Lisa Pratta went on to work for Mallinckrodt after it acquired Questcor for $5.6 billion in 2014.

According to recently unsealed court documents, Charles Strunck and Lisa Pratta allege that Mallinckrodt violated the False Claims Act by intentionally bribing physicians and staff to boost sales of Acthar.

Whistleblowers Strunck and Pratta allege that, since 2007, Mallinckrodt intentionally engaged in an illegal scheme to increase Acthar sales and profits by:

  • Offering illegal kickbacks for physicians, including “valuable incentives, rewards and other forms of remuneration” in exchange for prescribing and promoting Acthar.
  • Offering sales representatives monthly bonuses (up to $80,000 per month) to sell Acthar.
  • Bribing office staff to schedule meetings with physicians treating multiple sclerosis patients.
  • Making false statements to the FDA regarding Acthar effectiveness in various medical conditions.
  • Promoting and marketing Acthar for FDA-unapproved, off-label uses.
  • Causing the submission of hundreds to thousands of false claims for Acthar to federal healthcare programs.
  • Directing employees to conceal evidence of the full extent of its advertising, promotional and marketing materials and plan

“Questcor's conduct has had a material effect on the Government Health Care Programs decision to pay for H.P. Acthar Gel,” says the lawsuit. “Had these programs known that reimbursements were being made for H.P. Acthar Gel caused by Questcor's unlawful promotion, it would not have made such reimbursements.”

Strunk Pratta Claim Mallinckrodt Cheated Government Out of Millions

Much of the Mallinckrodt’s Acthar sales come from Medicare and Medicaid reimbursements, paid for with taxpayer dollars. If the allegations surrounding Acthar sales are true, each Medicare and Medicaid claim for payment is invalid since sales did not follow federal and state rules and regulations under the False Claims Act.

In this case, the government could file a claim seeking three times the total amount of all false claims, plus a $5,500 to $11,000 penalty for each individual false claim.

Strunck and Pratta claim Mallinckrodt’s actions “cheated the federal government out of millions of dollars that should not have been paid, thereby enriching [the company] and subjecting patients to unapproved, unsafe and potentially ineffective uses of H.P. Acthar Gel."

Because the government chose to intervene, Strunck and Pratta are eligible to collect between 25% and 30% of the full government recovery as a cash whistleblower award.

Investigation Suggests 80% Doctors Enjoyed Acthar Sales Perks

Mallinckrodt has faced numerous problems regarding Acthar. In 2017, the companied paid the Federal Trade Commission (FTC) $100 million to resolve allegations that it violated antitrust laws to prevent price undercutting by competitors. Mallinckrodt did not admit wrongdoing in the settlement.

Regarding the alleged illegal kickbacks, results from a 2018 investigation into the case found that at least 80% of doctors who prescribed Acthar to Medicare patients in 2016 received cash or other perks from Acthar drug manufacturers. Between 2013 and 2016, the investigation’s findings suggest Questor and Mallinckrodt paid over $6.5 million for consulting, marketing, and promotional speaking services for Acthar sales.

Mallinckrodt Blames Questcor for Allegations

Mallinckrodt says it is disappointed with the government’s decision to join the case. It doesn’t deny the allegations, but says subsidiary Questcor is primarily at fault.

However, according to the whistleblower lawsuit against Mallinckrodt, the prohibited activities "have knowingly been continued since the merger and acquisition of Questcor by Mallinckrodt."

To protect whistleblowers from employer retaliation and to help keep the investigation private, whistleblower lawsuits are kept under seal until the government files notice to intervene. Court documents for this case were unsealed on March 6, 2019 after the Department of Justice completed its investigation and decided to intervene.

According to the government’s filing, the Department of Justice has until June 4, 2019 to file its complaint. The Department of Justice has yet to comment on the FCA case.

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