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UPDATE: Mallinckrodt stock slides 10% premarket after it files suit over Medicaid patient access to Acthar gel

Ciara Linnane

Mallinckrodt Plc shares fell 10% in premarket trade Tuesday after the drug company said it has filed suit against the U.S. Department of Health and Human Services (HHS) and Centers for Medicare and Medicaid Services (CMS) to protect Medicaid patient access to its Acthar gel, a treatment a range of illnesses including MS and lupus. The suit "seeks to hold unlawful and set aside the Agency's recent unjustified decision to require that Mallinckrodt change the base date average manufacturer price (AMP) used to calculate Medicaid drug rebates for Acthar(R) Gel (repository corticotropin injection)," the company said in a statement. The CMS decision reverses without explanation a 2012 approval of the calculation of Medicaid rebates for the gel, said Mallinckrodt. "We are disappointed with the action taken by CMS. "With our repeated attempts to engage both HHS and CMS in productive discussions ultimately rebuffed, we find ourselves with no other choice than to vigorously defend our position, through the courts, that Medicaid patients should have access to this important therapy," said Mark Casey, general counsel at Mallinckrodt. The move would eliminate Medicaid sales of the gel and undermine the company's effort to build on its existing investment of more than $500 million to modernize the gel. It would also limit the company's ability to continue to invest in R&D for a pipeline that includes such diseases as ALS, Duchenne muscular dystrophy and others. The company said the issue could have an up to $600 million impact. Shares are down 18% in the last 12 months, while the S&P 500 has gained 3.9%.