A Senator found out Medicare is spending hundreds of millions on a drug that may not work -- and nothing happened

You would think that if a United States Senator has it on good authority that Medicare was spending hundreds of millions on a drug that may not work, there would be an uproar.
Especially if the drug cost 3,000% more than it did a decade ago, despite the fact that nothing about it had materially changed in that time (or for that matter since its creation in the 1950s).

You would think someone would be upset if it was quickly becoming one of the top expenses for Medicare Part D? 

You would think there would be Congressional hearings — embarrassed CEOs taking their private jets to Washington,  at the very least, to be yelled at in front of the entire country.

You would think there would be an attempt at looking into what happened. 

You would think that someone, somewhere in Washington DC would get to writing legislation to prevent this kind of government waste. 

The situation is real, but none of that happened.

The drug we’re talking about is called Acthar. It’s made by a company called Mallinckrodt, which acquired it 2014. In January of this year, Mallinckrodt raised its price to $US36,382 a vial, according to data provider Truven, but that wasn’t far off what it cost back in 2015 when Medicare part D spent over $US500 million on the drug, making it one of the top-20 expenses for the program, government data show. 

One other thing you should know. For years pharmacy benefit managers and insurance plans have been restricting use of Acthar or requiring prior approval for prescriptions of the drug to treat anything but infantile spasms. 


Back in September 2015, Senator Tim Scott (R-SC) learned of all of Acthar’s issues and sent a letter to the Centres for Medicare and Medicaid Services (CMS) to find out what was going on.

“The overwhelming majority of prescriptions for Acthar are being paid for by Medicare,” Scott wrote in the letter, which was obtained by Business Insider.

“Costs to Medicare rose from $US7 million in 2008 to $US141 million in 2012. Acthar reimbursements have been severely restricted by most large pharmaceutical companies and Tricare has discontinued reimbursements for this drug. In a recent NBC report, Florida and Dr. Sean Orr, former Chief of Neurology at Baptist Medical Center were charged with fraud for intentionally diagnosing patients with MS and prescribing Acthar to treat a disease these patients did not have. At the same time, Questcor Pharmaceuticals — the manufacturer of Acthar — paid Orr $US250,000 for consulting fees.”

Questcor is the company Mallinckrodt acquired to gain Acthar. 

Like I said, Acthar is primarily used as a treatment for infantile spasms, but it is indicated to treat 18 other ailments (including multiple sclerosis, or MS).

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

So it’s not hard to see why it’s suspect that Medicare Part D, a program for the elderly, started spending hundreds of millions of dollars on Acthar after Mallinckrodt acquired it in 2014. 

“As stewards of the taxpayer, we need to know why CMS continues to pay for this drug when Tricare and the nation’s top insurance providers have severely restricted reimbursements for this drug,” said Scott’s letter.

The response he got from CMS was, to put it mildly, less than adequate.

“Part D sponsors are responsible for making appropriate coverage determinations and ensuring that covered Part D drugs meet the requirements in this section,” CMS wrote back to Senator Scott a week later.

“Acthar H.P. gel meets all criteria for inclusion as a covered Medicare Part D medication. CMS does not have any oversight of the cost of medications and medication pricing. CMS regulations state that we cover the medication as long as it is determined to be a Part D billable drug.”

Or in other words, Acthar doesn’t violate the law as it’s written, and we don’t write laws — Senators do. 

Inventing moral fibre

We contacted Senator Scott’s office to see what happened after they received CMS’s response — to see if they planned on addressing this in Congress, or at least with other GOP Senators. 

“This was a constituent-based inquiry, and we wanted to assist a South Carolina resident who had concerns over these specific prescription costs,” Michele Exner, Scott’s Press Secretary, told us.

And that was that. So back to the letter.

Remember that this was all going down in 2015, right when the fury over pharmaceutical firms jacking up drug prices was rising to the public’s attention and taking hold of Washington. Martin Shkreli, the pharma -bro CEO who raised the price of a AIDS medication 2,000%, was public enemy number one. Valeant Pharmaceuticals, which dramatically raised the price of two life-saving heart drugs, caught the ire of then-Presidential candidate Hillary Clinton.

The company’s executives would eventually be called to answer for their business model, as would Shkreli and eventually Heather Bresch, CEO of Epi-Pen maker Mylan Pharmaceuticals (again the bare minimum of what we can ask for under these circumstances).

But nothing ever happened to anyone at Mallinckrodt.

It’s just another example of the government’s inability to hold the company accountable for abusive behaviour. Aside from Acthar — Mallinckrodt’s big money-maker — the company also manufactures a generic form of oxycodone, a powerful opioid.

HP Acthar chart priceBusiness InsiderA brief history of Acthar

As the Washington Post reported this month, the Drug Enforcement Administration (DEA) started investigating Mallinckrodt in 2011 for allegedly violating laws meant to stop highly addictive opioids from making it into the black market, principally in Florida.

From WaPo:

Ultimately, the DEA and federal prosecutors would contend that the company ignored its responsibility to report suspicious orders as 500 million of its pills ended up in Florida between 2008 and 2012 — 66 per cent of all oxycodone sold in the state. Government investigators alleged in internal documents that the company’s lack of due diligence could have resulted in nearly 44,000 federal violations and exposed it to $US2.3 billion in fines, according to confidential government records and emails obtained by The Washington Post.

After 6 years of investigating, though, the best the government could get out of Mallinckrodt was a $US35 million fine and no admission of wrongdoing.

According to internal DEA documents viewed by the Washington Post, “‘Mallinckrodt’s response was that ­’everyone knew what was going on in Florida but they had no duty to report it.'” 

So the company knew that it was hurting people. It’s just that apparently the legal framework to hold a company responsible for knowingly allowing opioids to make it to the black market isn’t really in place.

And that’s really the point here. Medicare Part D is a relatively new program (from the George W. Bush presidency) and the opioid crisis is also a new, tragic phenomena. These are the moments when government should act swiftly to craft legislation that could stop abusive behaviour in the private sector, especially if legislators are interested in lowering the cost of healthcare across the board. But that’s not happening.

Instead, people are becoming addicted to deadly drugs. Instead, money is being wasted on alleged placebos. Instead, nothing is happening at all.


Read the full letter from Senator Scott embedded below:


Sen. Tim Scott letter to CMS, 2015 by Linette Lopez on Scribd

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