Maker of $34,000-a-vial drug to pay $100 million for allegedly preventing competition

Drug company Mallinckrodt Pharmaceuticals has agreed to pay US$100 million to settle a lawsuit relating to alleged anti-competitive behaviour. Photo / 123RF

Drug company Mallinckrodt Pharmaceuticals has agreed to pay US$100 million ($140m) to settle a lawsuit alleging that a company it acquired in 2014 engaged in anti-competitive behavior to preserve its monopoly on a $34,000-a-vial infantile spasm medicine.

The allegations, brought by the Federal Trade Commission and attorneys general from five states, center around H.P. Acthar Gel, a rare disease drug that currently has "limited direct competition," according to a regulatory filing by the company.

Acthar Gel, which once sold for US$40 ($56) per vial, was acquired by Questcor Pharmaceuticals in 2001 for US$100,000 ($140,000) plus royalties according to the lawsuit. Questcor -- which was acquired by Mallinckrodt in 2014 --then raised the list price of the drug, ultimately to more than US$34,000 ($47,661) a vial. The drug brought in more than US$1 billion in U.S. revenue in 2015 for Mallinckrodt, according to the legal complaint.

While big price hikes on old drugs have garnered lots of public and political scrutiny, the Acthar hike alone -- an 85,000 percent increase in price -- wasn't the primary focus of the federal and state investigation. Instead, the case highlights one avenue by which drug companies that engage in price hikes can, allegedly, attempt to protect those increases from competition.

"Questcor took advantage of its monopoly to repeatedly raise the price of Acthar," Edith Ramirez, chairwoman of the Federal Trade Commission said in a statement. "We charge that, to maintain its monopoly pricing, it acquired the rights to its greatest competitive threat, a synthetic version of Acthar, to forestall future competition."

In countries outside the U.S., Synacthen Depot, a very similar drug was made and sold by Novartis. The drugs are not identical, but Synacthen has been used to treat patients with infantile spasms and other similar conditions for decades, according to the lawsuit. When Novartis decided to sell the U.S. rights to the drug, the sale represented a "nascent competitive threat" to Acthar, the lawsuit states -- even though it was not yet approved as a treatment in the U.S. Questcor outbid several other companies, in a deal worth at least US$135m ($189m).

The FTC was joined by the attorneys general of Alaska, Maryland, New York, Texas and Washington in its suit.

"We are pleased to confirm that we have entered into a settlement agreement with the FTC staff to fully resolve this matter, subject to approval by the Commission. We will comment further at the appropriate time," the company said in a statement on its website.

In an ironic twist, Questcor outbid several companies for Synacthen -- including Retrophin, a pharmaceutical company that was founded by Martin Shkreli, the former pharmaceutical executive best known for a big price hike on a different drug, Daraprim. Retrophin later sued Questcor alleging that the move "preserved and entrenched" its monopoly. That lawsuit settled for US$15.5m ($21.7m).