By Diane Bartz
WASHINGTON (Reuters) - Mallinckrodt Plc (N:MNK) has agreed to pay $100 million to settle allegations that a subsidiary broke U.S. antitrust law by sharply increasing the price of a multiple sclerosis drug while ensuring that no rival medicine appeared on the market, the Federal Trade Commission said on Wednesday.
Mallinckrodt's share price dropped sharply to just under $43 from above $49 on a report Wednesday, which proved incorrect, that the FTC would sue Mallinckrodt. It spiked above $50 after news of a settlement and closed at $46.53, down 5.8 percent.
In 2001, Questcor bought the rights to Acthar, a type of hormone-based drug used to treat infantile spasms as well as multiple sclerosis. Over time, the company raised the price from $40 per vial to more than $34,000, the FTC said. Questcor was acquired by Mallinckrodt in 2014.
Acthar, which is off patent, represented 34 percent of Mallinckrodt's $3.4 billion in net sales for fiscal 2016, the company said in a government filing.
Per patient, Medicare spent more on Acthar than for any other drug in 2015, putting out $504 million for just 3,104 patients, according to the Medicare Drug Spending Dashboard.
Several U.S. drug makers have been criticized for sharp increases in drugs, notably Turing Pharmaceuticals' Daraprim and Mylan's (O:MYL) EpiPen. The U.S. Centers for Medicare and Medicaid Services reported 11 drugs saw price increases of more than 100 percent in 2015.
"This is an egregious case of a monopolist doing a deal to eliminate potential competition and keep its power over pricing. It is abhorrent that lifesaving drugs cost New Yorkers tens of thousands of dollars," said Attorney General Eric Schneiderman in a statement.
Mallinckrodt, an Irish company headquartered in the United Kingdom, said the settlement would not affect its net sales and slammed the FTC's probe.
"We continue to strongly disagree with allegations outlined in the FTC's complaint, believing that key claims are unsupported and even contradicted by scientific data and market facts," a company representative said in a statement.
Questcor also bought the rights to Synacthen in 2013 in order to prevent the development of a rival drug, the FTC said in its complaint. Under the settlement, Mallinckrodt will also license Synacthen rights.
"This is too little, too late. The proper thing would have been to block the (Synacthen) deal in the first place," said David Balto, a veteran of the FTC now in private practice.
The drug's pricing has also come under criticism from lawmakers concerned about abusive increases in drug prices. Senator Amy Klobuchar, a Minnesota Democrat, criticized the sharp price increase as early as 2008.
Klobuchar called the settlement announced on Wednesday "a strong message that companies will not be able to keep the profits they earn by violating antitrust laws."
In addition to the FTC and New York, the settlement also included Alaska, Maryland, Texas and Washington.