Questcor shares plunge after Aetna drops coverage

Questcor Pharma shares plunge after Aetna drops coverage for most uses of company's Acthar gel

Associated Press

Shares of drug developer Questcor Pharmaceuticals Inc. plunged Wednesday after a research website reported that health insurer Aetna Inc. will stop reimbursement for most uses of its main product, H.P. Acthar gel

THE SPARK: Citron Research said Aetna will drop reimbursement for all uses except infantile spasms. Questcor also markets Acthar gel as a treatment for multiple sclerosis, neuromuscular conditions, and a kidney condition called nephrotic syndrome.

Questcor, which is based in Anaheim Hills, Calif., said Wednesday in a brief statement that it is reviewing the Aetna bulletin, and it does not believe the insurer's decision will materially affect Questcor's results.

THE BIG PICTURE: Citron Research is a short seller's research firm that publishes reports online about companies. Short sellers earn money when a stock declines. A disclaimer on its website said Citron does not guarantee that it is providing all available information, and it might hold a position in any of the securities. Citron did not immediately return an email request for comment from The Associated Press.

A clinical policy bulletin outlining Aetna's decision was posted online last Friday by the insurer.

Aetna spokeswoman Cynthia Michener said the nation's third-largest insurer made its decision based on a lack of clinical evidence that the drug is more effective than steroids.

"Our previous position was that this was a last-resort treatment," Michener said in an email. "We now state that it is not medically necessary because there is no clinical evidence that the drug is more effective than steroids."

Patients currently receiving Acthar gel will be covered so they can complete their treatment.

The Citron report came a day after an Oppenheimer & Co. analyst said Questcor will likely receive more revenue from Acthar gel.

Analyst Christopher Holterhoff said Tuesday it is very likely that Medicaid will lower its reimbursement rates for Acthar gel, meaning the company won't have to cover as much of the cost of the product and will get significantly more revenue from sales to the government program. Holterhoff now expects Questcor to report $687 million in Acthar revenue in 2013, up from $590 million. He added that investors are getting more comfortable with the risks Questcor faces, and the stock should become more stable.

A large portion of Acthar orders come from Medicaid, and Questcor does not get any revenue from those sales because it is required to pay full rebates to state Medicaid programs that buy the drug.

SHARE ACTION: Down 39 percent, or $19.86, to $30.66 in Wednesday afternoon trading. The stock is up about 10 percent in the year to date.

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