A Senator found out Medicare is spending hundreds of millions on a drug that may not work — and nothing happened – Business Insider

tim scott
Republican Sen. Tim Scott
of South Carolina.

AP Photo/Jacquelyn

You would think that if a US senator had it on good authority
that Medicare was spending hundreds of millions of dollars on a
that may not work
, there would be an uproar.

Especially if the drug cost 3,000% more than it did a decade ago,
even though nothing about it had materially changed in that time
(or for that matter since its creation in the 1950s).

You would think someone would be upset if it was quickly becoming
one of the top expenses for Medicare’s prescription drug program.

You would think there would be congressional hearings —
embarrassed CEOs taking their private jets to Washington, at the
very least, to be yelled at in front of the entire country.

You would think there would be an attempt at looking into what

You would think that someone, somewhere in Washington, would get
to writing legislation to prevent this kind of government waste.

The situation is real, but none of that happened.

The drug we’re talking about is called Acthar. It’s made by a
company called Mallinckrodt,
which acquired it 2014. In January, Mallinckrodt raised its price
to $36,382 a vial, according to the data provider Truven, but
that wasn’t far off what it cost back in 2015 when Medicare Part
D, a prescription drug program, spent over $500 million on the
drug, making it one of the top 20 expenses for the program,
government data shows.

One other thing you should know. For years pharmacy benefit
managers and insurance plans have been restricting use of Acthar
or requiring prior approval for prescriptions of the drug to
treat anything but infantile spasms.


Back in September 2015, Sen. Tim Scott, a South Carolina
Republican, learned of all of Acthar’s issues and sent a letter
to the Centers for Medicare and Medicaid Services to find out
what was going on.

“The overwhelming majority of prescriptions for Acthar are being
paid for by Medicare,” Scott wrote in the letter, which was
obtained by Business Insider.

“Costs to Medicare rose from $7 million in 2008 to $141 million
in 2012. Acthar reimbursements have been severely restricted by
most large pharmaceutical companies and Tricare has discontinued
reimbursements for this drug. In a recent NBC report, Florida and
Dr. Sean Orr, former Chief of Neurology at Baptist Medical Center
were charged with fraud for intentionally diagnosing patients
with MS and prescribing Acthar to treat a disease these patients
did not have. At the same time, Questcor Pharmaceuticals — the
manufacturer of Acthar — paid Orr $250,000 for consulting fees.”

Questcor is the company Mallinckrodt acquired to gain Acthar.

As I said, Acthar is primarily used as a treatment for infantile
spasms, but it is indicated to treat 18 other ailments (including
multiple sclerosis, or MS).

hp achtar spending vs patients v3

Medicare spending on

Andy Kiersz/Business

So it’s not hard to see why it’s suspect that Medicare Part D, a
program for the elderly, started spending hundreds of millions of
dollars on Acthar after Mallinckrodt acquired it in 2014.

“As stewards of the taxpayer, we need to know why CMS continues
to pay for this drug when Tricare and the nation’s top insurance
providers have severely restricted reimbursements for this drug,”
Scott’s letter said.

The response he got from CMS was, to put it mildly, less than

“Part D sponsors are responsible for making appropriate coverage
determinations and ensuring that covered Part D drugs meet the
requirements in this section,” CMS wrote back to Scott a week

“Acthar H.P. gel meets all criteria for inclusion as a covered
Medicare Part D medication. CMS does not have any oversight of
the cost of medications and medication pricing. CMS regulations
state that we cover the medication as long as it is determined to
be a Part D billable drug.”

In other words, Acthar doesn’t violate the law as it’s written,
and we don’t write laws — senators do.

Inventing moral fiber

We contacted Scott’s office to see what happened after it
received CMS’ response — to see whether it planned on addressing
this in Congress, or at least with other GOP senators.

“This was a constituent-based inquiry, and we wanted to assist a
South Carolina resident who had concerns over these specific
prescription costs,” Michele Exner, Scott’s press secretary, told

And that was that. So, back to the letter.

Remember that this was all going down in 2015, right when the
fury over pharmaceutical firms jacking up drug prices was rising
to the public’s attention and taking hold of Washington. Martin
Shkreli, the pharma-bro CEO who raised the price of an AIDS
medication by 2,000%, was public enemy No. 1. Valeant
Pharmaceuticals, which dramatically raised the price of two
lifesaving heart drugs, caught the ire of Hillary Clinton during
the presidential campaign.

The company’s executives would eventually be called to answer for
their business model, as would Shkreli and eventually Heather
Bresch, the CEO of the EpiPen maker Mylan Pharmaceuticals (again
the bare minimum of what we can ask for under these

But nothing ever happened to anyone at Mallinckrodt.

It’s just another example of the government’s inability to hold
the company accountable for abusive behavior. Aside from Acthar —
Mallinckrodt’s big moneymaker — the company also manufactures a
generic form of oxycodone, a powerful opioid.

HP Acthar chart price

A brief history of


The Washington Post reported this week
, the Drug Enforcement
Administration started investigating Mallinckrodt in 2011 on
suspicion of violating laws meant to stop highly addictive
opioids from making it into the black market, principally in

From The Post:

“Ultimately, the DEA and federal prosecutors would contend that
the company ignored its responsibility to report suspicious
orders as 500 million of its pills ended up in Florida between
2008 and 2012 — 66 percent of all oxycodone sold in the state.
Government investigators alleged in internal documents that the
company’s lack of due diligence could have resulted in nearly
44,000 federal violations and exposed it to $2.3 billion in
fines, according to confidential government records and emails
obtained by The Washington Post.”

After six years of investigating, though, the best the government
could get out of Mallinckrodt was a $35 million fine and no
admission of wrongdoing.

According to internal DEA documents viewed by The Post,
“‘Mallinckrodt’s response was that ­’everyone knew what was going
on in Florida but they had no duty to report it.’”

So the company knew that it was hurting people. It’s just that
apparently the legal framework to hold a company responsible for
knowingly allowing opioids to make it to the black market isn’t
really in place.

And that’s really the point here. Medicare Part D is a relatively
new program (from the George W. Bush presidency), and the opioid
crisis is also a new, tragic phenomena. These are the moments
when government should act swiftly to craft legislation that
could stop abusive behavior in the private sector, especially if
legislators are interested in lowering the cost of healthcare
across the board. But that’s not happening.

Instead, people are becoming addicted to deadly drugs. Instead,
money is being wasted on alleged placebos. Instead, nothing is
happening at all.

Read the full letter from Scott embedded below:


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