The city of Rockford, Illinois has filed a lawsuit against Mallinckrodt PLC (NYSE:MNK) accusing the pharmaceutical company of charging exorbitantly for its blockbuster drug, Acthar. Among the accusations leveled against Mallinckrodt by the city include the fact that the pharmaceutical firm is using its near-monopoly status to charge approximately $35,000 for a vial of the drug.
This is a huge jump in price as a vial of the drug was priced at $40 in 2001. The price was, however, increased by its two subsequent owners including Mallinckrodt. The lawsuit first came to the attention of the public after a report appeared on WIFR, a television station based in Rockford.
Exorbitant cost
According to the suit lodged against Mallinckrodt, Rockford paid close to half a million dollars for nine prescriptions of Acthar in 2015 and this was for the treatment of two children. This translated to mean that a vial cost approximately $54,339.76.
“…the Defendants have been knowingly enriched by the amount charged for Acthar over and above what they could have charged in a competitive market,” said the lawsuit.
Besides being in violation of antitrust laws, Mallinckrodt is also accused of violating the Illinois Consumer Fraud and Deceptive Practices Act. Also named as a defendant in the lawsuit is United BioSource. The latter is accused of acting in collusion with Mallinckrodt.
Before Acthar was acquired by Mallinckrodt in 2014, it used to be owned by Questcor. Earlier in January, Mallinckrodt forked out $100 million in a settlement deal reached with five states and the U.S. Federal Trade Commission. This was based on accusations that had been brought against Questcor alleging that the pharmaceutical company had acquired the drug’s competitor with a view to stifling competition.
Though Acthar is capable of treating up to 19 ailments, doctors restrict its use to treatment of infantile spasms. But even in this case, the number of physicians in the United who prescribe it is less than 1%. Its efficacy has also been questioned owing to the fact that it has never been clinically tried.
On Monday shares of Mallinckrodt PLC fell by 0.44% to close the day at $44.82.