Mallinckrodt shares drop after U.S. joins cases over expensive drug

(Reuters) - The U.S. Justice Department has joined a pair of whistleblower lawsuits alleging a drugmaker now owned by Mallinckrodt Plc improperly promoted an expensive multiple sclerosis treatment and paid kickbacks to doctors who prescribed the drug.

FILE PHOTO: A general view of the Department of Justice building is seen in Washington, U.S., April 18, 2019. REUTERS/Amr Alfiky

News of the department’s decision to intervene in the lawsuits after conducting an investigation into the whistleblowers’ allegations sent the stock price of Mallinckrodt Plc down nearly 14 percent on Tuesday.

The lawsuits, filed in federal court in Philadelphia, claimed Questcor Pharmaceuticals, which Mallinckrodt acquired in 2014, defrauded government healthcare programs by illegally marketing H.P. Acthar Gel.

The drug is used to treat infantile spasms and multiple sclerosis. In 2007, Questcor hiked Acthar’s price for a single a vial from about $2,000 to $23,000, one of the lawsuits said. Mallinckrodt said the drug’s price today is $38,892.

Last year, Acthar represented 35 percent of Mallinckrodt’s $3.2 billion in net sales.

CNN first reported on the case on Tuesday. Mallinckrodt in a statement said it disagrees with the allegations and has been in “advanced settlement talks with the government over the past several months.”

Mallinckrodt’s shares were trading at $15.77, down 13.97 percent, at midday on Tuesday.

The lawsuits were filed in 2012 and 2013 by former Questcor employees Charles Strunck and Scott Clark under the False Claims Act, which allows whistleblowers to sue companies on the government’s behalf to recover taxpayer money paid out based on fraudulent claims.

The lawsuits are filed under seal so the government can investigate their claims. The Justice Department following an investigation may intervene in the cases, which is typically a major boost for them.

In his complaint, Strunck alleged Questcor in an effort to boost sales paid doctors illegal kickbacks in the form of bribes, speaker fees and consulting deals in exchange for promoting and prescribing Acthar.

His lawsuit also alleged that Questcor’s sales staff used deceptive and misleading marketing tactics to promote Acthar for uses and treatment regimens not approved by the U.S. Food and Drug Administration.

The Justice Department in court filings in both lawsuits made public on March 11 said it was intervening in the cases and planned to file its own complaint within 90 days. The lawsuits were then unsealed.

Mallinckrodt in January 2017 agreed to pay $100 million to resolve claims that Questcor violated antitrust laws by sharply increasing the price of Acthar while ensuring that no rival medicine appeared on the market.

(This story has been refilled to correct current price of Acthar in fourth paragraph)

Reporting by Nate Raymond in Boston; Editing by Tom Brown