BioPharma, Legal

Humana sues drugmaker Mallinckrodt over alleged price gouging

Humana alleges that Mallinckrodt illegally jacked up the price of the injected drug Acthar, causing the insurance company to pay several times more for the drug – which the FDA approved in 1952 – than it otherwise would have.

A health insurer is suing the maker of a drug on the market for more than 60 years in federal court, alleging that it engaged in “one of the most outrageous price-gouging schemes in the history of American medicine.”

In a complaint filed Thursday in the U.S. District Court for the Central District of California, Louisville, Kentucky-based Humana alleged that Staines-upon-Thames, U.K.-based Mallinckrodt engaged in monopoly, bribery, racketeering, fraud and other practices to increase the price of H.P. Acthar Gel (corticotropin) by more than 97,000 percent, from $40 per vial in 2001 to $39,000 by 2018. Were it not for the alleged scheme, Humana said it would have paid a fraction of the $700 million over the course of eight years that it did.

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A spokesperson for Mallinckrodt wrote in an email the case should be dismissed, and that the drugmaker would “vigorously” defend itself.

“Mallinckrodt strongly believes that Humana’s complaint is completely without merit, as it is based on misstatements of fact and erroneous applications of the law,” the spokesperson wrote. “Humana’s past and present utilization management policies require that a patient and prescriber provide Humana with adequate clinical rationale and treatment history before Humana makes an informed and discretionary decision to reimburse Acthar.”

A spokesperson for Humana confirmed the filing of the lawsuit, but declined to comment further, citing a company policy of not commenting on pending litigation.

The drug initially won Food and Drug Administration approval in 1952 for a variety of indications – at a time when the agency’s regulations were less strict than today – and currently has approval for infantile spasms, exacerbations of multiple sclerosis and certain other indications.

The trajectory of Acthar’s list price will be familiar to those following drug price increases that have achieved similar infamy in recent years.

In 2001, Aventis – now part of French drugmaker Sanofi – sold rights to the then-moribund Acthar for $100,000 plus royalties to Questcor, which then increased the price to $750, increasing it further in the ensuing years. The price already exceeded $30,000 by the time Mallinckrodt bought Questcor for $5.6 billion in April 2014.

Humana’s complaint alleges that Mallinckrodt engineered the price increases in three ways. First, it acquired rights to a competing Novartis drug not approved in the U.S., Synacthen Depot, and then shelved it without developing it for the U.S. market. Second, it artificially increased demand for the drug by using a charitable foundation for illegal payment of patient copays. And third, it bribed doctors to prescribe Acthar when there were cheaper and more effective treatments available.

A study published last year found that 88 percent of more than 200 physicians who frequently prescribe Acthar had received payments from Mallinckrodt, including 20 percent who received payments of more than $10,000.

Photo: Chris Ryan, Getty Images