Mallinckrodt is suing the Centers for Medicare & Medicaid Services and the Department of Health and Human Services for changing the way Medicaid rebates are calculated for its pricey H.P. Acthar Gel medication, a move that would require Mallinckrodt to pay back large sums of money to the federal government.
Why it matters: The drug company expects the change will eliminate 10% of its Acthar sales, and that it will have to pay up to $600 million in retroactive rebates — news that sent the company's stock plunging by 24% Tuesday to a record-low $9.87 per share.
Reality check: Acthar has been under the gun for several years now. Independent experts say the drug, which is a half-century old and treats multiple sclerosis and infantile spasms, is excessively priced and isn't any better than cheaper alternatives.
The bottom line: Mallinckrodt is fighting tooth and nail to protect Acthar because it is the lifeblood of the company. The drug makes up 35% of Mallinckrodt's revenue.
