A drug company just got caught jacking up the price of a baby medicine by 85,000%

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This week, drug manufacturer Mallinckrodt Pharmaceuticals settled a lawsuit with the US Federal Trade Commission (FTC) for US$100 million, for engaging in illegal anti-competitive behaviour to ensure its continued monopoly over a life-saving medication for infants with epilepsy.

More than a decade ago, Acthar Gel sold for $40 a vial, but since it's been acquired by Mallinckrodt, the price has been raised to more than $34,000 a vial, netting the company more than $1 billion in revenue in 2015.

Acthar Gel is a hormone injection that's used to treat a rare form of epilepsy called infantile spasms, which usually occurs in babies before their first birthday.

Infantile spasms can be brought on by a range of pre-existing conditions, such as cerebral palsy, Down syndrome, and tuberous sclerosis, and are estimated to affect just 2,000 to 2,500 children a year in the US.

The condition can appear as early as one month after birth, and rather than the seizures you see in adults, infantile spasms are extremely subtle, and parents often don't notice it happening.

In fact, the condition is so rare, most doctors might only see one or two cases in their entire career - something that Acthar Gel manufacturers have in the past used as an excuse to keep the prices sky-high.

Back in 2001, Questcor Pharmaceuticals acquired Acthar Gel, and by 2012, had raised the price to $28,000 a vial. Questcor was acquired by Mallinckrodt Pharmaceuticals in 2014, and the price leapt again to $34,000 a vial.

"We have this drug at a very high price right now because, really, our principal market is infantile spasms," Don M. Bailey, Questcor's chief executive, said in 2009.

"And we only have about 800 patients a year. It's a very, very small — tiny — market."

But then in 2012, the motivations became a little more clear.

"We could lower the price and make less money," Bailey told The New York Times, "and then we would be sued by our shareholders."

Fast-forward to this week, and the FTC has now sued Mallinckrodt for preventing competition in the market by buying the rights to the only major competitor for Acthar Gel, Synacthen, and then locking it away so no one could use it.

According to Carolyn Y. Johnson at The Washington Post, Synacthen has been used to treat patients with infantile spasms and other similar conditions for decades outside the US. And now it's finally being freed up to for use in the US, too.

"As part of the settlement, Mallinckrodt also agreed to license Synacthen to a competitor approved by the FTC," Johnson reports.

Despite the lawsuit, Mallinckrodt remains defiant, saying it didn't really do anything wrong, because the two drugs work differently to treat the same condition, so developing Synacthen would be difficult.

So it removed access to it so no one could even try.

"The company argued in its statement that the resources necessary to develop Synacthen in the US would be considerable and pointed out that trials could be difficult to conduct because patients would have to forego a known treatment, Acthar," says Johnson.

Ironically, none of this would have happened if it wasn't for 2016's best nominee for Most Punchable Face, pharmaceuticals entrepreneur and infamous price-gouger, Martin Shkreli.

Shkreli brought the shady dealings of Questcor and Mallinckrodt to the FTC's attention in 2014, when his company, the drugmaker Retrophin, filed a suit in 2014 alleging anticompetitive tactics.

Shkreli made headlines himself in 2015, when Retrophin bought the anti-parasitic drug, Daraprim, and raised the price of it by 5,000 percent overnight.

"Questcor stopped me from competing with their very high-priced drug which made the Daraprim price increases look modest," Shkreli told Elizabeth Balboa at Benzinga this week.

"And it appears they will be punished for what I believed was an illegal manoeuvre."

If all of this has made you a little bit depressed and all the more cynical about the US drug market — we hear you.

Development of Synacthen has been held back for years now, so while this whole mess is definitely good news, actual relief for the parents of children with infantile spasms is still going to be a long time coming.

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