America's third-largest health insurer, Aetna Inc (AET.N), said it would no longer reimburse Questcor Pharmaceutical's QCOR.O sole drug for most diseases, wiping off more than $1 billion of the drugmaker's market value.
In a clinical policy bulletin published on its website on Wednesday, Aetna said Questcor's Acthar gel was medically necessary only to treat infantile spasms as the drug was no better than existing therapies in the 18 other diseases that it was approved to treat.
Shares of Anaheim, California-based Questcor fell as much as 56 percent, before regaining some losses to trade down 40 percent at $30.37 Wednesday afternoon on the Nasdaq.
Analysts expressed doubts that Aetna's decision was final but the insurer confirmed to Reuters that it was dropping coverage on the majority of Acthar's indications.
"Where it says we believe something is not medically necessary or experimental or investigation, it generally means there is no coverage for that condition or indication," Aetna's spokeswoman Cynthia Michener said.
"The decision was based on the lack of clinical evidence that the drug is more effective than existing steroids, and part of Aetna's regular review of coverage policy for various drugs that it covers," Michener said.
Questcor said it was in the process of reviewing Aetna's bulletin, but did not expect the move to have a material impact on its results of operations, or represent a material change in Aetna's insurance coverage of Acthar.
Aetna accounted for about 5 percent of prescriptions for Acthar shipped in 2012, Questcor said in a statement.
Acthar Gel, which Questcor bought from Aventis Pharmaceuticals Inc in 2001, has been used for years to treat a range of disorders including multiple sclerosis, nephrotic syndrome and seizures in babies. The product was most recently approved to treat skin and muscle problems.
The stock has been under pressure since July when Citron Research, run by California-based investor and short-seller Andrew Left, raised concerns about Questcor's marketing strategy and a possible generic threat to Acthar.
(Reporting by Vidya P L Nathan, Zeba Siddiqui; Editing by Sreejiraj Eluvangal and Rodney Joyce)