(Reuters) – Mallinckrodt Plc filed a lawsuit against the U.S. Department of Health and Human Services and forecast an about 10% hit to annual net sales of its gel used to treat multiple sclerosis symptoms following changes to Medicaid rebate calculations, sending shares plunging as much as 34% on Tuesday.
The drugmaker filed the lawsuit, which also named the health agency’s Centers For Medicare And Medicaid Services division(CMS), after CMS changed how it calculated Medicaid discounts for the company’s Acthar gel.
Mallinckrodt said the change could result in a one-time charge of up to $600 million.
“While it remains to be seen whether Mallinckrodt’s lawsuit will allow it relief from CMS’ ruling, this will be yet another near-term overhang on Acthar,” said Ami Fadia, an analyst with SVB Leerink.
The U.S. Justice Department last month joined a pair of whistleblower lawsuits alleging a drugmaker now owned by Mallinckrodt improperly promoted Acthar and paid kickbacks to doctors who prescribed the treatment.
Acthar Gel, which is used to treat infantile spasms and multiple sclerosis, brought in revenue of $1.11 billion in 2018, accounting for 35% of the company’s total revenue.
Mallinckrodt said CMS’ decision could impede the company’s efforts to develop new therapies for patients with fewest treatment options.
CMS is reviewing the lawsuit, a spokesman told Reuters.
The Medicaid program provides health coverage to low income Americans and is jointly paid for by the states and the federal government.
The company’s shares were trading down about 27% at $9.52.
Reporting by Aakash Jagadeesh Babu in Bengaluru; Editing by Sriraj Kalluvila