Monday, December 4, 2017

How has Mallinckrodt Pharmaceuticals CEO Mark C. Trudeau found time for Ashley Madison, with all of the controversies swirling around his St. Louis company?


How has Mallinckrodt Pharmaceuticals CEO Mark C. Trudeau found time to fiddle around on Ashley Madison, with all of the contentious issues swirling around his company? Perhaps all things are possible when you are paid $12.6 million a year.

How many headache-inducing issues have crossed Trudeau's desk recently? In January 2017, Mallinckrodt paid $100 million to settle a Federal Trade Commission lawsuit alleging anti-competitive behavior. In December 2016, Mallinckrodt was cited in a U.S. Senate report on price gouging in the prescription-drug industry.

The biggest headache, however, might just be brewing. In February, Mallinckrodt executives were served with subpoenas -- one from the U.S. Securities and Exchange Commission (SEC), the other from the U.S. attorneys office in Massachusetts. The subpoena from Massachusetts apparently involves the company's patient-assistance program. Several other pharmaceutical companies have received similar subpoenas regarding patient assistance, so it's unclear how much trouble that might cause for Mallinckrodt.

The SEC subpoena, however, involves allegations of fraud regarding the sales, profits, promotions, and pricing of Acthar, a pricey drug used in the treatment of lupus, multiple sclerosis, and infantile spasms. That appears to have the makings of a major headache.

How did the fraud allegations arise? It appears they originated with Andrew Left, an activist short seller, author, and editor of the online investment newsletter Citron Research. From an article at Investopedia:

Mallinckrodt (MNK) Chief Executive Officer Mark Trudeau has been accused of fraud by short-seller Andrew Left for allegedly misrepresenting how much Medicare pays for its main drugs.

“Trudeau has been caught red-handed committing securities fraud,” Left, the head of Citron Research, wrote in a November 16 report. “Doctors do not even know if the most expensive drug reimbursed by Medicare, at $162,000 per patient, even works.” Citron Research is a firm that identifies fraud and terminal business models, according to its website.

What about specifics? Left provides them:

Left claimed that Mallinckrodt’s chief misled investors when, during a conference call in October, he said that its H.P. Acthar Gel’s exposure to Medicare is roughly a quarter of the company’s business. It is 61 percent, according to the short-seller’s analysis of the Center for Medicare and Medicaid Services dashboard, which was set up in 2015 to provide detailed information on Medicare spending on prescription drugs. He also alleges that there is no clinical evidence that the gel, which is often prescribed to treat multiple sclerosis relapses and a rare kidney disease, actually works.

A Mallinckrodt representative was not immediately available for comment. But it's not the first time that the head of Citron Research has questioned the company's sales of the drug. Responding to criticism last year, CEO Trudeau said that Left "really put out a whole variety of different speculations and allegations and not very many facts," according to CNBC.

More details can be found at Citron's Nov. 16, 2016 newsletter. Is the report causing discomfort in the investment community? The answer appears to be yes:

After the release of Citron’s research results yesterday, Mallinckrodt shares tumbled 12 percent. Some analysts saw the sell-off as an investing opportunity while others have provided a counter-argument to Left’s allegations which are based on a database that provides data on gross sales.

“We don’t know the exact net sales of Acthar to Medicare/Medicaid,” said Leerink’s Jason Gerberry and Etzer Darout, according to Barron. But they believe that “Acthar net sales would be closer to 38-45% range vs. the 61% figure cited in the short-report.”

They also added that “Acthar Gel is an old product lacking good randomized, controlled data consistent with most products approved in the modern era.”

The pricing of Acthar has been a source of controversy for some time. It might not help that Trudeau's annual compensation shot up 29 percent, to $12.6 million, at about the time price gouging in the drug industry hit the national spotlight:

It’s not the first time that the high price of Mallinckrodt’s Acthar has been called into question. In 2014 a New York Times report said that many experts say there’s insufficient evidence that the gel works better than much cheaper options. “Some in the medical community say the program’s soaring bill for Acthar shows Medicare needs to do more to safeguard taxpayer dollars,” it added.

17 comments:

Anonymous said...

Can we say, "Greed"?

Anonymous said...

Here's the scary part: This guy actually believes he's worth $12 million.

Anonymous said...

This guy's company paid a $100 million fine to FTC for anti-competitive behavior? And that was this year? Just another cost of doing business, I suppose.

Anonymous said...

Even the Ashley Madison trolls, it seems, haven't swooped in to defend this guy.

legalschnauzer said...

@2:51 --

I haven't heard from a single troll about Mr. Trudeau.

Anonymous said...

Price gouger!

Wall Streeter said...

“Trudeau has been caught red-handed committing securities fraud,” Left, the head of Citron Research, wrote in a November 16 report.


If I'm Mr. Trudeau, and a stock analyst accuses me of securities fraud, I'm unhappy and a bit concerned.

Of course, if I make $12m a year, I might not give a chit what this analyst says.

Anonymous said...

Andrew Left and Citron are prominent in the investment world. Investors pay attention to what they say, and they have been far from complimentary of Mr. Trudeau.

Gordon Gekko said...

Excellent article from Citron and Andrew Left about Mallinckrodt:


http://citronresearch.com/wp-content/uploads/2016/11/MNK-and-Medicare-final-c.pdf

Anonymous said...

Trudeau has been taking a scalding at Citron for quite some time . . .

"Let's not forget that Acthar continues to represent a massively disproportionate chunk
of Mallinckrodt's bottom line, a number that Trudeau always is happy to dance around,
rather than disclose the true concentration risk it took on when it levered up massively
to acquire this never-proven drug.

"This is securities fraud plain and simple. Moreover it points to the elephant in the room:
What else is Trudeau lying about?
 Kickbacks to doctors?
 Patient assistant programs?
 Unreported clinical studies that failed to prove HP Acthar efficacy?
 Free patient dinners at Olive Garden?"

Anonymous said...

Some interesting background on Acthar, the drug that rakes in so much cash for Mallinckrodt and Mr. Truedeau:


https://www.fiercepharma.com/financials/medicare-wasting-220m-a-year-on-questcor-s-controversial-acthar

legalschnauzer said...

@5:34 --

Thanks for sharing the article from Fierce Pharma. Very interesting. This part jumped out at me:


Acthar, a hormone-based drug derived from pig pituitary glands, has been on the market since 1952 but didn't become a concern for Medicare until after Questcor bought the product in 2001 and began widening the menu of disorders the product could purportedly treat. The price started at about $40 per vial back then but grew steadily until 2007, when the company jacked the price up to $23,000 per vial. In 2012, the Medicare Part D drug program paid an average of $41,763 per prescription, according to ProPublica.

That's a hefty price tag for a drug that some doctors say hasn't been proven to be all that effective. Acthar is often prescribed to older people to treat rare kidney diseases and relapses of multiple sclerosis. But Lily Jung Henson, medical director of neurology at Swedish Medical Center's Ballard campus in Seattle, told ProPublica she thinks Medicare should push for more studies to determine if the product actually works in those patients. "I can't afford to waste their money by giving them a drug that I can't convince myself has been effective," she said.

e.a.f. said...

perhaps A.M. kept his mind off the real problems in his life. of course your public service announcement will enable all those who he is sexually active with to get tested for those "gifts" which keep on giving.

it is strange that the government would cover a drug which is unproven. they might want to pay a tad more attention to that one.

Anonymous said...

2:51 - it's because Roger censors comments. His blog, so he totally gets to control his critics' participation. So we're basically wasting our time commenting most of the time. Good job Roger. You win. Enjoy your echo chamber.

legalschnauzer said...

@4:58 --

If you knew the facts and law well enough to present legitimate criticism, it would be published. But you are too lazy and ill-equipped intellectually to do that. So you just lob verbal spitballs. You're not a critic, you're a spitball thrower You're goal isn't to criticize, it's to litter my blog with verbal trash. You're not going to get away with that.

If you would grow up beyond the third-grade level, perhaps you could participate here. But I'm not holding my breath on that one.

Anonymous said...

You approve verbal trash quite frequently. Just not when it hits on the truth about you.

legalschnauzer said...

@1:33 --

So, you admit what you send is verbal trash?

Thank you. Case closed.