Mallinckrodt

Mallinckrodt Pharmaceuticals is an Irish–tax registered manufacturer of specialty pharmaceuticals (namely, adrenocorticotropic hormone), generic drugs and imaging agents. In 2017 it generated 90% of sales from the U.S. healthcare system. While Mallinckrodt is headquartered in Ireland for tax purposes, its operational headquarters is in the U.S. Mallinckrodt's 2013 tax inversion to Ireland drew controversy when it was shown their main drug Acthar, was Medicaid's most expensive drug. Mallinckrodt Pharmaceuticals is an Irish–tax registered manufacturer of specialty pharmaceuticals (namely, adrenocorticotropic hormone), generic drugs and imaging agents. In 2017 it generated 90% of sales from the U.S. healthcare system. While Mallinckrodt is headquartered in Ireland for tax purposes, its operational headquarters is in the U.S. Mallinckrodt's 2013 tax inversion to Ireland drew controversy when it was shown their main drug Acthar, was Medicaid's most expensive drug. Mallinckrodt acquires (for repricing), manufactures, and distributes products used in diagnostic procedures and in the treatment of pain and related conditions. This includes the acquisition, manufacture, and distribution of specialty pharmaceuticals, active pharmaceutical ingredients, contrast products, and radiopharmaceuticals. The company employed 5,500 and had net sales of $3.2 billion in 2017; of which $2.9 billion was from the U.S. healthcare system. The company has been implicated as a major contributor to the prescription opioid scandal around the over-prescription of oxycodone in the United States. In 1867, the Mallinckrodt brothers, Gustav, Otto and Edward, founded G. Mallinckrodt & Co. in St. Louis, Missouri. The Mallinckrodt family had immigrated from Germany, and Otto and Edward both returned to Germany, the leader in chemistry at the time, for advanced training. Mallinckrodt Chemical Works was incorporated 15 years later. By 1898, the company had established itself as a pharmaceuticals supplier and in 1913 became the first to introduce barium sulfate as a contrast medium for x-rays. In part due to early success in production of radiology agents, and at the behest of surgeon Evarts Graham, Edward Mallinckrodt Sr. assigned one of the company's top chemists to collaborate in developing the first radiographic agent for gallbladder and bile duct imaging. A posthumous endowment by Edward Mallinckrodt Jr. on behalf of his father to the Washington University medical school radiology department resulted in the creation of the Mallinckrodt Institute of Radiology. In 2013, Mallinckrodt executed a corporate tax inversion to Ireland to avoid U.S. corporate taxes, by acquiring Irish-based Cadence Pharma for $1.3 billion. This was despite the fact that almost all of Mallinckrodt's revenues come from the U.S. market (see table below). In 2015, Mallinckrodt was one of a number of U.S. tax inversions that the Wall Street Journal reported to be using their lower tax-platform to acquire further U.S. pharmaceutical firms, such as the $5.6 billion acquisition of Questor in 2014. In December 2015, the Irish Times reported the CEO as saying that 'It’d have to be a pretty dramatic change to the US tax code' for Mallinckrodt to return to the U.S., and that 'We’re already foreign domiciled, so we may as well take full advantage of it'. In February 2018, Mallinckrodt told the Wall Street Journal that it would get a $450 to $500 million tax credits from the Tax Cuts and Jobs Act of 2017 (TCJA), but that some of these benefits would be offset by the anti-inversion provisions of the TCJA. In April 2018, Mallinckrodt's Irish tax inversion came under further scrutiny when it was revealed that Mallinckrodt's main drug Acthar, was one of the most expensive drug-related expenditures for the U.S. Medicare programme. In December 2012, the New York Times in an article on Mallinckrodt's main drug H.P. Acthar Gel, reported that 'How the price of this drug rose so far, so fast is a story for these troubled times in American health care — a tale of aggressive marketing, questionable medicine and, not least, out-of-control costs'. In January 2017, the Financial Times reported that Mallinckrodt had made a settlement of $100 million with the U.S. Federal Trade Commission (FTC) in relation to anti-trust probes on Acthar, and quoted the FTC as saying: 'Questcor took advantage of its monopoly to repeatedly raise the price of Acthar, from $40 per vial in 2001 to more than $34,000 per vial today – an 85,000 percent increase'. The city of Rockford, Illinois is now suing Mallinckrodt and pharmacy benefit management company Express Scripts for their failure to reduce Acthar's price. In May 2017, the Wall Street Journal reported that U.S. investor Jim Chanos accused Mallinckrodt in relation to Acthar of being a 'one-product company', and the Irish Times quoted Chanos on Bloomberg stating that a 'murky alliance' had developed between Mallinckrodt and distributor Express Scripts, who is the sole distributor of Acthar, and that 'Acthar is the epitome of excessive drug prices'. In September 2017, the Journal of the American Medical Association (JAMA) published research showing that Acthar was one of the most expensive drugs in the U.S. Medicaid and Medicare system, but that most sales of Acthar were 'driven in part by a relatively small group of doctors who were prescribing it heavily', and that alternatives at one-fiftieth of the price of Acthar were available. In April 2018, a whistleblower lawsuit claimed Acthar, which had never passed a modern FDA process as Acthar had been available for 60 years and was thus passed under FDA 'grandfathering' rules, had an unknown formulation and efficacy. The lawsuit claimed that this situation would not be sustainable without the support of Express Scripts.