The US Attorney’s Office announced that it filed a complaint under the False Claims Act against Mallinckrodt ARD LLC (formerly known as Mallinckrodt ARD, Inc. and previously Questcor Pharmaceuticals, Inc.) (collectively “Mallinckrodt”). The government alleges that Mallinckrodt has violated the False Claims Act by underpaying Medicaid rebates due as a result of large increases in the price of its drug H.P. Acthar Gel (“Acthar”). Pursuant to the Medicaid Drug Rebate Program, drug manufacturers must pay quarterly rebates to state Medicaid programs in exchange for Medicaid’s coverage of the manufacturers’ drugs. The mandatory rebate includes an inflationary component, which is designed to insulate the Medicaid program from drug price increases that outpace the rate of inflation. For each unit sold to Medicaid, a manufacturer must pay the difference between the drug’s current price and the price the drug would have had if its price had increased at the rate of inflation since 1990 or the date when the drug was first marketed, whichever date is later. The government alleges that, although Acthar was first marketed long before 1990, Mallinckrodt and its predecessor, Questcor, began calculating and paying rebates as if Acthar was a new drug first marketed in 2013, based on the FDA’s approval of a new indication for Acthar’s use in 2010. Given that Questcor had raised Acthar’s price by more than $20,000 per unit prior to 2013, the government alleges that Questcor, and later Mallinckrodt, avoided paying inflationary rebates on any of those pre-2013 price increases, and has thus underpaid hundreds of millions of dollars at the expense of American taxpayers.
