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Mallinckrodt High Yield, Loan Debt Slides re $100M FTC Price-Fix Settlement

Debt backing Mallinckrodt sold off late in the session after the U.K.-based pharmaceutical company said it had settled with the Federal Trade Commission (FTC) over allegations that it used its monopoly to hike drug prices.

According to a statement from the FTC, Mallinckrodt ARD Inc., formerly known as Questcor Pharmaceuticals, Inc., and its parent company, Mallinckrodt plc, have agreed to pay $100 million to settle FTC charges that they violated the antitrust laws when Questcor acquired the rights to a drug that would otherwise threaten its monopoly in the U.S. market for adrenocorticotropic hormone (ACTH) drugs.

Acthar is a specialty drug used as a treatment for infantile spasms, a rare seizure disorder afflicting infants, as well a drug of last resort used to treat other serious medical conditions.

The 5.5% notes due 2025 led the downward move, falling 3.5 points to 86.5 immediately following the news, while the shorter-dated 5.75% notes due 2022 lost 1.5 points, to 92.

The company’s term loan due 2021 (L+275, 0.75% floor) was down more than a point to a 99 bid, from quotes above par before the news.

The New York Times earlier today reported that the FTC “is preparing to file charges” against the company “for allegedly using its monopoly to jack up the price of” its Acthar Gel drug by more than 2,100 percent, to $28,000 per dose.

The FTC’s complaint alleges that, while benefiting from an existing monopoly over the only U.S. ACTH drug, Acthar, Questcor illegally acquired the U.S. rights to develop a competing drug, Synacthen Depot. The acquisition stifled competition by preventing any other company from using the Synacthen assets to develop a synthetic ACTH drug, preserving Questcor’s monopoly and allowing it to maintain extremely high prices for Acthar.

“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,” said FTC Chairwoman Edith Ramirez in a statement. “We charge that, to maintain its monopoly pricing, it acquired the rights to its greatest competitive threat, a synthetic version of Acthar, to forestall future competition. This is precisely the kind of conduct the antitrust laws prohibit.”

Mallinckrodt public limited company develops, manufactures, markets, and distributes branded and generic specialty pharmaceutical products and therapies in the United States, Europe, the Middle East, Africa, and internationally. — Rachelle Kakouris/Kelsey Butler

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