FTC catches Mallinckrodt Pharmaceuticals doing the Martin Shkreli act

Mallinckrodt Pharmaceuticals was caught raising prices of medicines for infants of less than a year old to skyrocketing prices.

Mallinckrodt Pharmaceuticals, a drug manufacturer, has settled a lawsuit for $100 million with the US Federal Trade Commission (FTC) for having engaged in anti-competitive behaviour in order to ensure that it retains its monopoly over a life-saving medication for infants afflicted with epilepsy.

The medicine is a hormone injection that is used to treat a rare form of epilepsy called infantile spasms, which normally occurs in babies before they hit their first birthday.

The condition of infantile spasm is activated by a range of pre-existing conditions, including Down syndrome, cerebral palsy and tuberous sclerosis.

Since the condition is a rare phenomenon, most doctors might come across one or two cases in their entire career. This has been one of the reasons cited by Acthar Gel manufacturers as a justification to keep the price of the medication sky-high.

In 2001 Acthar Gel was acquired by Questcor Pharmaceuticals who raised the price of the $40 vial to $28,000. In 2015, Questcor Pharmaceuticals was acquired by Mallinckrodt Pharmaceuticals who in turn raised the price of a vial to a whopping $34,000. In 2015 the company reported a revenue of $1 billion.

In 2009, Questcor’s CEO, Don M Bailey had said, “We have this drug at a very high price right now because, really, our principal market is infantile spasms. And we only have about 800 patients a year. It’s a very, very small – tiny – market.”

However, in 2012 the real motive for the price hike came out when Bailey told the NY Times “We could lower the price and make less money, and then we would be sued by our shareholders.”

Surprisingly if not ironically, it was the pharmaceutical industry’s infamous entrepreneur, Martin Shkreli, that brought the dealings of Questcor and Mallinckrodt under the FTC’s scrutiny when Shkreli’s Retrofin filed a lawsuit alleging anticompetitive tactics.

“Questcor stopped me from competing with their very high-priced drug which made the Daraprim price increases look modest,” said Shkreli to Elizabeth Balboa at Benzinga. “And it appears they will be punished for what I believed was an illegal manoeuvre.”

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Categories: Entrepreneurship, HR & Organization, Regulations & Legal, Strategy

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