Pharma company Mallinckrodt sues US government over Medicaid rebate program
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Pharma company Mallinckrodt sues US government over Medicaid rebate program

UK pharmaceutical giant Mallinckrodt filed suit against the US Department of Health and Human Services (HHS) and Centers for Medicare & Medicaid (CMS) on Tuesday to defend profitability of their drug, Acthar Gel Injection (Acthar).

In their complaint, Mallinckrodt challenges a recent CMS decision that would alter the base date average manufacturer price (AMP) of Acthar. Acthar is the company’s biggest revenue generator, and through CMS’s new categorization of the drug, the company’s Medicaid drug rebates would reduce. Mallinckrodt issued a press release claiming the potential loss of Medicaid sales to be around 10 percent.

The Medicaid Drug Rebate Program, created in 1991 by Congress, aims to offset federal and state costs of most outpatient prescription drugs dispensed to Medicaid patients. Drug manufacturers participate within the program via a national drug rebate agreement. The agreement requires a manufacturer to pay quarterly rebates to state Medicaid programs. The amount is determined by the number of units of the drug dispensed to Medicaid beneficiaries during the quarter. In return, the manufacturer receives state Medicaid coverage of their applicable drug.

The rebate amount is calculated by CMS via reports on pricing data submitted by the manufacturer. The drug’s base date AMP is a crucial component of this calculation. This base date AMP typically measures the drug’s price over a fixed period. Therefore, the same base date AMP is used for the drug’s entire life span.

The FDA approved Acthar for treatment against infantile spasms in 2010 under an original New Drug Application (NDA). A drug product that is produced or distributed under a distinct NDA approved by the FDA is considered a “single source drug.” In short, a single source drug is a brand drug without generic equivalents. Single source drugs are eligible for their own base date AMP under the Medicaid Drug Rebate Program. As a result, starting in 2013, Acthar was assigned a new base date AMP which has been in place ever since.

However, in 2016, CMS claimed that Acthar’s new base date AMP should not have been changed and is currently requiring Mallinckrodt to revert to the previous base date AMP assigned to Acthar. On May 10, CMS notified Mallinckrodt that if it does not revert the base date AMP by May 24, the agency will identify Mallinckrodt as being “out of compliance” with its Medicaid Drug Rebate Program reporting requirements. CMS specifically cited that Acthar was not a single source drug and thus not warranted in the base date AMP change to begin with.

Mallinckrodt argues in their complaint that the new CMS decision is unlawful. Specifically, Mallinckrodt cites numerous correspondence with CMS showing that Acthar’s new base date AMP had agency approval. Additionally, Acthar marketed with the indication of infantile spasms continues to be a single source drug, which under the program regulations, is justified in a new base date AMP. In addition to their citation of statutory language, Mallinckrodt argues the financial loss they will incur is substantial if the base date AMP reversion is upheld.

This is not the first time Mallinckrodt has been in contention with the US government. While CMS has stated they are currently reviewing the present lawsuit, last month, the US Justice Department joined lawsuits alleging Acthar was improperly promoted and the company paid kickbacks to doctors who prescribed the treatment.