There's frightening new data on the effects of a blockbuster drug Wall Street loves to hate

Andrew Left, Citron ResearchScreenshot, CNBCAndrew Left, Citron Research is the most outspoken short seller targeting MNK.
  • Adverse events for Mallinckrodt Pharmaceuticals Acthar spiked last year, FDA data show. Hospitalizations tripled, “other serious” side effects quadrupled.
  • In a lawsuit, a former Mallinckrodt sales rep says he was pushed to promote the Achtar for off-label uses.
  • A neurologist who has studied the drug says the spike in hospitalizations could be a sign it is being overused.

Mallinckrodt Pharmaceuticals’ and its $US36,382 blockbuster drug — a decades-old treatment called Acthar — are under siege from short sellers.

These traders — who are profiting from the stock’s decline — have questioned the drug’s efficacy, Mallinckrodt’s dependence on deals with pharma middlemen for the drug’s expanding use, and why a drug that’s primarily indicated as a treatment for infants is turning into a massive expense for Medicare — a program for the elderly.

Now, the critics have a new line of attack. Data from the Food and Drug Administration show that reports of adverse events — everything from hospitalisation to death — have spiked recently, far faster than the rate of prescriptions.

Andrew Left of Citron Research pounced on the data, releasing a report Thursday that said “Citron believes the reason for the increase in adverse events is the company’s expansion of Acthar into new indications where it has not conducted clinical trials in order to test its safety in new indication.”

He’s not the only short-seller targeting the company, but he is the shrillest. And Mallinckrodt shares tumbled in early trading Thursday.

To be clear — some raw numbers are relatively small because only about 9,000 people take Acthar, according to Mallickrodt.

There were 82 deaths reported in 2016, up from 69 the year before. Hospitalizations, meanwhile, nearly doubled to 427 and “other serious” side effects quadrupled to 436.

The company released a statement saying that often some of these side effects are relatively minor, and that correlation of side effects with Acthar doesn’t necessarily mean causation. You can read that here.

What the data does show us, is that Mallinckrodt’s strategy of taking an old drug that never went through the rigors of FDA approval and trying to expand its use could have serious limits. The company has turned Acthar into a drug with over $US1 billion in annual sales, by convincing doctors to prescribe it even to the sickest patients, and even when there are much lower cost alternatives.
I asked
Dr. Dennis Bourdette, the chair of neurology at the Oregon Health & Science University about the FDA data. He’s studied Acthar’s usage — and he’s not a fan.

To Bourdette, the spike in adverse events could be a sign that the drug is being overused and that’s triggering side effects.
“Some doctors are using Acthar like an ongoing, monthly or weekly therapy over long periods of time, and when you do that there are all sorts of side effect that can occur because of the steroid effects that can occur,” Bourdette said.

On Acthar’s website, the company takes pains to say that it is not a steroid, even though it “works by helping your body produce its own natural steroid hormones.” Bourdette says that doesn’t matter because it still acts like one. “ACTH is having all these effects on the immune system apart from releasing cortisol,” Bourdette said, referring to the adrenocorticotropic hormone in Achtar.

“When your body produces too much cortisol you’re going to have chronic steroid side effects we’ve known about for decades, and every doctor is trained in those side effects.”

‘No idea’

So why are the doctors prescribing so much Acthar?

“I have no idea,” he said.

For infantile spasms and multiple sclerosis, Acthar is supposed to be taken for about 5 to 15 days, but there’s no specification on dosage for the 17 other conditions that can be treated with Achtar.

The drug was grandfathered into FDA approval because it dates back to the 1950s before clinical testing was required. As such, some have questioned its efficacy, especially since Mallinckrodt claims that it can be used to treat 19 ailments — the two most common are multiple sclerosis and infantile spasms.

Now, to be fair, Mallinckrodt has said time and time again that only the most desperate patients take Acthar — or in other words that its not the primary treatment for many of the ailments it is used against. Instead, it is used only after other drugs don’t work.

It also says on its website that while “the exact way that Acthar works in the body is unknown, further studies are being conducted… information is based on laboratory data, and how it relates to patient benefit is unknown.”

Some ideas

So why would doctors prescribe too much Acthar for the wrong ailments? We can’t be sure, but we do know that in December of 2016 a former Acthar sales rep, Barry Franks, filed a whistleblower suit against Mallinckrodt.

Franks alleged that the company pushed him to promote Acthar’s use for off-label indications — in fact, he’s saying his bonus depended on it. When he wouldn’t do things Mallinckrodt’s way — and his sales team didn’t see the “explosive growth” other teams did — he was fired.

From the complaint:

Franks… alleges that there were illegal sales practices being committed in other regions, and that Mallickrodt used these regions as the gold standard or basis Incentive Bonus Plans for which all regions were compared and asked to duplicate. Franks was expected to deliver sales that were not supported by lawful practices.

Franks was also aware of other compliance related issues at Mallinckrodt. Franks… alleges that these issues include but were not limited to: potential insurance/Medicare fraud…, HIPPA violations where four or eight week prescriptions were provided where there was no patient visit and violations where Mallickrodt permitted, for a certain period of time, certain employees to manipulate the compensation plan by having physicians wrote shorter prescriptions that were refilled, to earn a bonus on the patient at the shortest prescription interval.

(Shorter prescriptions did not allow sufficient time to see if a patient responded to the drug. In some cases the drug was shipped the same day as the referral was received. This was done to “game the system” and potentially commit insurance/Medicare fraud.”

Mallinckrodt didn’t respond to a request for comment on Franks claims.

Another reason why doctors may want to prescribe Acthar goes back to Dr. Bourdette’s study on the few doctors who do prescribe Acthar. Mallinckrodt, like a lot of other drug companies, also has a speakers program through which it can book and pay doctors to talk about its drugs.

Typically, the top prescribers of Acthar not only have received payments from Mallinckrodt but also “are typically getting larger payments from companies that are developing disease-modifying therapies,” Bourdette told us back in March.

One top prescriber, Dr. Regina Berkovich, an assistant professor of clinical neurology at the University of Southern California, accepted $US23,895 for writing a paper and talking about Acthar in 2013. That was out of $US142,978 in speaking and other fees from various drug companies she collected that year.

Another Doctor, Robert Baughman, a professor of internal medicine at the University of Cincinnati, is collaborating with Mallinckrodt on a study on Acthar’s efficacy curing patients with sarcoidosis, a disease that affects the lungs and lymph glands. This is part of the “investigator-initiated research,” which Mallinckrodt supports financially through grants.He has also received $US21,625 for promoting Acthar from 2013 to 2015 (that’s out of $US116,000 for speaking and promotion fees for drugs during that period). He declined to comment on his research when we asked him about it March.

What he’s published about Acthar is not encouraging. Of 47 patients, 18 discontinued the program because of “cost (four patients), death (two patients), or drug toxicity (eleven patients), or noncompliance (1 patient).”

Still, both his study and Dr. Berkovich’s study are being touted as advancements by Mallinckrodt.

The number one prescriber of Acthar (making up 1% of all prescriptions) is an Ohio rheumatologist named David Mandel, according to the most recent government data. In August of 2014, he was forced to pay a $US640,000 fine for the “shipment of misbranded drugs.” From 2013 to 2015, Mandel has received $US22,762 in speaking and other fees from Mallinckrodt for promoting Acthar.

Until rigorous, independent clinical trials are done, there will continue to be questions about the efficacy of Acthar. At least, there should be for the sake of anyone taking it.

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