A furious employee is suing Wall Street's most hated pharma stock over claims about its blockbuster drug

An employee of embattled drugmaker Mallinckrodt is suing the company and its leadership, alleging they lied about its dependence on its controversial blockbuster drug, Acthar.

The employee bought shares as part of the company’s stock purchase plan, so he’s also suing on behalf of the plan.

The complaint is that Mallinckrodt’s failure to disclose that up to 60% of Acthar’s revenue comes from Medicare and Medicaid put its revenues at greater risk than management led on. From the complaint:

Throughout the Relevant Period, Defendants made false and misleading statements and failed to disclose material adverse facts about the long-term sustainability of the Company’s monopolistic Acthar revenues and the exposure of Acthar to reimbursement rates by Medicare and Medicaid. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that Acthar’s monopoly status as the only FDA-approved ACTH preparation was the product of unlawful anticompetitive practices and failed to disclose that its increasing reliance on Medicare and Medicaid meant that the Company’s monopolistic Acthar revenue would be threatened if the government took action to limit the price paid for this drug by taxpayers

Wall Street has been pummelling Mallinckrodt — and short sellers have been building their bets against it — over Acthar for more than a year. The drug dates back to the 1960s, before FDA required trials for approval, so it was grandfathered into approval status. That means the drug has yet to undergo the kind of clinical trials required today for many of the indications that it is prescribed for.

It used to be really cheap, but it now costs almost $US40,000, and Mallinckrodt acquired it when it bought a company called Questcor. The company’s already agreed to pay $US100 million to settle allegations that Questcor broke antitrust laws as it raised the price of Achtar while keeping competitors out of the market.

But the list of complaints about Acthar, raised by short sellers who profit from its decline as well as academics and lawmakers focused on drug pricing, is longer than that. I’ve written about them all.

These include that:

Hp achtar spending vs patients v3Andy Kiersz/Business InsiderMedicare spending on Acthar

Earlier this week a judge invalidated a number of Mallinckrodt patents on INOmax, a respiratory treatment for babies that made up 15% of its revenue — a move that would only serve to increase exposure to Acthar

I’ve reached out to the company for comment.

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