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City suing drug maker alleges monopoly on infant seizure medication

A city in Illinois is suing the manufacturer of a specialty drug that treats infant seizures, alleging an illegal monopoly and price gouging.

The suit alleges Mallinckrodt ARD, formerly Questcor, has taken advantage of its hold on the market to exorbitantly raise the price of Acthar HP Gel.

Acthar is a specialty drug used to treat infantile spasms, a rare seizure disorder affecting babies. It’s also a drug of last resort for several other serious medical conditions including Multiple Sclerosis. The price, sometimes more than $100,000 to treat one patient, has been criticized in the past and it’s been the subject of past lawsuits.

But it’s unique to have a city government jumping into the fray. Rockford Illinois, which provides health insurance to about 1,000 employees, is seeking class action status for the lawsuit.

RELATED: Consumers kept in the dark over drug pricing

The city spent nearly half a million for nine doses of Acthar that treated two patients, according to the complaint.

The cost per vial to the city was more than $54,000. The two employees paid a $30 co-pay for each dose, totalling $270 out-of-pocket.

Acthar can be even more expensive. In January the Dayton Daily News interviewed a Miami Township mom who had to pay a $5,000 deductible toward two vials of Acthar to treat her son’s infantile spasms. The total cost for the doses was $180,000.

READ MORE: $180,000 price tag for Miami Twp. boy’s prescription

“By establishing and maintain(ing) a monopoly, exercising monopoly power, and engaging in other unlawful acts and practices, the defendants were able to extract exorbitant revenue from consumers that had nowhere else to turn for treatment,” the complaint says.

The lawsuit argues that those most harmed by the monopoly pricing are self-funding payers — employers who pick up the tab for the majority of their employees’ prescriptions.

The lawsuit also names United BioSource, a subsidiary of the nation’s largest pharmacy benefit manager, Express Scripts as a defendant. It alleges the company colluded with Mallinckrodt to maintain the monopoly.

RELATED: Dayton man lead plaintiff in drug lawsuit alleging price-gouging

The lawsuit provides detailed background on the history of Acthar price increases.

First approved by the FDA in 1952, it has long been the only treatment for infantile spasms despite not being approved for that use until 2010.

Questcor acquired the rights to the drug in 2001 for $100,000. At the time, Acthar sold for about $40 per vial. Between 2001 and 2007, Questcor raised the price to more than $2,000 a vial. In 2010, the company was granted “orphan status” for Acthar granting it seven years of exclusivity.

Then in August of 2007, the price increased more than 1,000 percent in one day, to more than $23,000 a vial.

“Mallinckrodt has encountered no competitive constraints on its ability to repeatedly increased Acthar’s price and, by extension, its revenue and profit margins,” the complaint says.

From 2011 to 2015, Acthar net sales grew from $218 million to more than $1 billion, despite the small number of patients who use it.

RELATED: Dayton man lead plaintiff in drug suit alleging price-gouging

Mallinckrodt agreed to pay $100 million in January to settle Federal Trade Commission charges that the company violated antitrust laws by acquiring the rights to Acthar’s only competitor Synacthen.

“Questcor took advantage of its monopoly to repeatedly raise the price of Acthar, from $40 per vial in 2001 to more than $34,000 per vial today – an 85,000 percent increase,” said former FTC Chairwoman Edith Ramirez in announcing the settlement. “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. This is precisely the kind of conduct the antitrust laws prohibit.”

Those charges stemmed from a lawsuit by Martin Shkreli, the “pharma bro” who drew ire for his own price gouging schemes and who was subsequently indicted for securities fraud.

RELATED: Hedge fund manager raises price of AIDS drug 5,000 percent

Shkreli’s former company Retrophin was set to purchase possible Acthar competitor Synacthen in 2013 for about $16 million. But on the day the sale was to go through, Questcor made a last minute agreement with Synacthen’s owners to pay up to $300 million for the product.

Shkreli sued and the FTC agreed with him. In addition to the FTC settlement, Questcor/Mallinckrodt paid out $15.5 million in his lawsuit.

Mallinckrodt has never developed Synacthen.


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