Jim Chanos slams Express Scripts and Mallinckrodt over high drug prices

[May 19, 2017] By Lawrence Delevingne

LAS VEGAS (Reuters) - Noted short-seller Jim Chanos on Thursday criticized the alliance between Mallinckrodt Plc which uses the pharmacy benefits manager Express Scripts as the exclusive distributor for its drug Acthar.

Chanos, speaking at SkyBridge Capital's SALT conference in Las Vegas, called the companies' use of third parties "a really questionable practice" and dubbed the partnership a "murky alliance" as it makes drug prices excessively high.

Mallinckrodt shares hit a session low of $39.60 after the comments and were last down 3.5 percent.

The Kynikos Associates LP hedge fund manager also cited existing regulatory pressure on Express Scripts' pharmacy benefit manager practices and called for U.S. Senator Claire McCaskill to investigate. Brian Henry, spokesman for Express Scripts, said the firm found Chanos' presentation "wildly inaccurate."

The U.S. Justice Department has been investigating Mallinckrodt along with other drug companies like Gilead, Valeant and Celgene for drug pricing practices.

Earlier this year, Mallinckrodt agreed to pay $100 million to settle a lawsuit alleging that a company it acquired in 2014 engaged in anti-competitive behavior to preserve its monopoly on a $34,000-a-vial infantile spasm medicine.

The allegations, brought by the Federal Trade Commission and attorneys general from five states, centered on Acthar, which once sold for $40 a vial but is now priced at $34,000 a vial often paid for by the Medicare program. The drug brought in more than $1 billion in U.S. revenue in 2015 for Mallinckrodt, according to the legal complaint.

Expres Script's Henry said his company's patient assistance program for Mallinckrodt's Acthar Gel "has no payer impact." He said in a statement that the Acthar Gel patient assistance program managed by United BioSource Corporation (UBC) means that underinsured or uninsured patients who meet clinical requirements for Acthar Gel receive the drug free of charge.

"There is no payer impact because the cost of the drug is paid fully by the manufacturer," he said. "This program is not like a manufacturer co-pay card program. UBC does not bill payers. We do not circumvent payer prior authorization rules or reimbursement." Henry also said the Acthar Gel PAP (patient assistance program) is a free goods program.

(Reporting by Lawrence Delevingne; Editing by Meredith Mazzilli)

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