Biopharmaceutical company Mallinckrodt plc (NYSE: MNK)'s shares lost about 25 percent of their value Tuesday following news that the company filed suit against the Department Of Health And Human Services and Centers for Medicare and Medicaid Services to challenge the level of Medicaid rebates issued for its Acthar gel.
Mallinckrodt shares were down 24.25 percent at $9.87 at the close Tuesday.
By taking this action, Mallinckrodt said it's hoping to set aside the agency's recent decision to require that Mallinckrodt change the base date average manufacturer price used to calculate Medicaid drug rebates for Acthar, which is used to treat conditions such as lupus, multiple sclerosis and infantile spasms.
"We are disappointed with the action taken by CMS," Mark Casey, Mallinckrodt's general counsel, said in a statement.
"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."
Without court intervention, net Medicaid sales of Acthar — which account for 10 percent of total sales — would be "eliminated" by the CMS decision, according to Mallinckrodt.
This would place the previous 2019 net sales guidance of $1 billion for the drug at risk and create the potential for retroactive non-recurring charges of as much as $600 million, the drugmaker said.
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