MNK stock is sinking this week after it was reported that the US Department of Justice (DOJ) is suing Mallinckrodt (NYSE:MNK) for alleged underpayment of Medicaid rebates.
The embattled pharmaceutical firm, which is currently involved in a separate billion-dollar lawsuit relating to its role in the opioid crisis, is accused of defrauding the Medicaid system out of hundreds of billions of dollars as a result of “meteoric” price increases for its biggest-selling drug, Acthar Gel. Joining a civil whistleblower lawsuit filed in the Boston federal court, the government said Mallinckrodt violated the False Claims Act by withholding rebates related to the gel, which now costs nearly US$40,000 per vial. MNK stock has dropped around 25% this week as a result.
The DOJ claims that Mallinckrodt ARD LLC, a subsidiary of the firm, began paying rebates on the treatment as if it was a new drug first marketed in 2013, despite the fact that it actually first went to market in 1990. The subsidiary, which was previously known as Questcor Pharmaceuticals prior to Mallinckrodt’s US$5 billion takeover in 2014, had allegedly raised the price of Acthar, a treatment for spasms in infants as well as for multiple sclerosis, by more than US$20,000 per unit before 2013, and it avoided paying higher rebates on the pre-2013 prices.
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MNK stock is currently trading for just $3.19, having previously been valued at over $100 at the time the company bought out Questcor.
In May of last year, Mallinckrodt sued the US Department of Health and Human Services over the calculation of rebates and is now arguing that the presiding judge barred any enforcement action while the case was pending. In a statement on Tuesday, Mallinckrodt accused the government of attempting an “end-run” around that case by filing “an unnecessary, duplicative and wasteful lawsuit on the exact same issue.”
The new lawsuit spells more bad news for investors in MNK stock after a torrid 12 months, which has brought the firm to the brink of bankruptcy.
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