FTC Investigates Questcor: Serious Jeopardy for Synacthen Deal

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Analysts Comments tell you Everything You (and FTC investigators) Need to Know

On June 11, Questcor (NASDAQ:QCOR) surprised the investment community with news that it had acquired rights to Synacthen for the United States and up to 40 countries from Novartis.  Within weeks the stock had doubled on that news, adding 1.75 billion in market cap.  Why?

Simple.  Synacthen is a synthetic version of ACTH, the sole labeled active ingredient in Acthar, which is Questcor’s only source of revenue.  Synacthen has been prescribed in Europe for well over a decade for the same general spectrum of indications that Acthar is labeled for in the US – but at 1/1000th the price. 

So when Questcor, which previously had no pipeline, no investigational efforts, and no significant double-blind studies proving efficacy of Acthar vs Synacthen, acquired these rights, the analyst community  went all giddy –  fawning all over how this move protected Questcor’s barrier to competition with regard to the pricing of Acthar.  Questcor postured the deal as if they bought Synacthen just because they wanted to acquire a new drug, but anyone with half a brain knew that was bullshit.   

And thank God the FTC has more than half a brain … sorry, Questcor.

For the full story you won’t find anywhere else, click here. 


Questcor Update: Largest Privately Owned Pharmacy Benefits Manager Study Finds 96% of Acthar Prescriptions Unnecessary

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   Another Step Towards Questcor’s Inevitable Endgame



Today, Citron shares a new key data point, so far overlooked by Wall Street.  This one is from Prime Therapeutics, the largest privately-held  PBM in the United States, as well as a thought leader in pharmacy benefit management strategies.  Their partnership with Blue Cross and Blue Shield covers 20 million people nationwide with an annual drug spend of $12.4 billion.  Prime recently issued a case study summary with regard to Acthar Gel prescriptions.  Its write-up of a study of 30 Acthar prescriptions states :  “Analysis Finds 96% of Use Unnecessary“.

This aligns Prime with Aetna’s increasingly restrictive coverage policies on Acthar, disclosed just a few weeks ago.



Link to the Prime Therapeutics study



As of yet, despite the span of years Questcor has had permission to sell Acthar Gel at inflated prices, it has accomplished no credible science to bolster the clinical basis for Acthar use.  Instead, it has aggressively expanded its sales force to push Acthar for other grandfathered label indications, which also lack rigorous clinical proof of superiority to existing steroid therapy.

Meanwhile, the company responded to Wall Street’s competitive landscape concerns with an amazing set of claims that Acthar contains some additional “secret sauce” ingredients, which are “not well understood”.  These assertions directly contradict the label granted by FDA under which Acthar is permitted to be sold in the US, which state that Acthar is a medically pure formulation of ACTH.   It is at the very least a fascinating topic of debate whether it is legally viable for a pharma company to make a one set of representations to the FDA, and other to Wall Street for the same marketed drug.

Prime Therapeutics joins a long list of skeptics including insurance companies and government regulators.


Is this just a Tug-of-War between Longs and Shorts?

One way investors have characterized the Questcor story is that it is simply a “battleground stock”, locked in a stalemate between longs and shorts.

Citron thinks all investors should consider the asymmetry of the real data points as to whether ever higher Acthar sales represents a sustainable strategy as Questcor’s sole means of revenue.



CEO Don Bailey  (Despite plentiful insider stock sales) Aetna restricts reimbursement policies
Sell  Side Analysts – such as the Lazard analyst who reiterates a 74 target on the stock, despite its having been cut in half. Prime Therapeutics scrutinizing “unnecessary use”
  United Healthcare tightening reimbursement procedures for Acthar
  Dr. Eric Matteson, Chairman of Division of Rheumatology at the Mayo Clinic  (1)
  Dr. Aaron Miller: Member of the Board of Directors of the American Academy of Neurology Chairman of the Clinical Advisory Committee, New York Multiple Sclerosis Society (2)
  Department of Justice Investigation


(1)  http://www.mayoclinic.org/bio/10815716.html
“Very little if any role for an ACTH product in rheumotatic diseases, I don’t see it.” …. 
“Limited to no attractiveness in rheumatology” …   “Enthusiasm is low”

(2)    http://www.mountsinai.org/profiles/aaron-miller
“I think there’s no demonstrated advantage of Acthar gel over IV or high dose methylprednisolone … Whether the drug has other advantages, hasn’t been clearly demonstrated … We don’t know yet if patients who failed on steroids would respond to Acthar gel. That’s not adequately investigated at this point … I don’t think there’s currently much indication to use that…”

   Beware reducing this story to a simple matter of “Citron vs Questcor”


Why won’t anyone talk about the Department of Justice investigation?  Clearly Questcor management can’t say anything.  But where is the analyst community adding value by assessing the risks?  What is the scope of the investigation?  Does it go to illegal compensation of physicians?  What is the geographic scope of the inquiry?   What is the range of potential impacts?

Fear of losing their one core, yet small market

Tuesday, Citron Tweeted a link to a study presented at a pharma conference sponsored, ironically, by Questcor.  The study affirmed the viability and efficacy of less expensive and now medically proven steroid therapy as an alternative to Acthar, for treatment of Infantile Spasms.  This is the sole indication the FDA granted Orphan Drug status for, allowing Questcor to bring Acthar to market.  That status was based on Acthar being the only medically justifiable alternative.

The study highlights again that Acthar, sold under a label that grandfathered use of ACTH as a drug, still lacks rigorous clinical testing to justify its use rather than dramatically less expensive steroid therapy.



Questcor is not a normal stock with a sustainable revenue stream based on a market opportunity stretching unimpeded into the future.  It is severely bounded by negative trends in insurance reimbursement, a darkening competitive landscape, both in new MS drugs and cheap synthetic ACTH, and vulnerabilities to the regulatory environment on numerous fronts.  Investors are cautioned against hanging a conventional multiple on this stock without consideration of the endgame.

Cautious Investing to All.



Questcor: When things go from Bad to Worse, and even Worse

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Nov 2nd update:

Perspective on breaking news for Questcor: November 2, 2012

This morning, researchers posted this link from the FDA website.


Questcor’s stock reacted immediately, but now Citron shares some thoughts on the significance of this data point. 

At first, Citron, was skeptical about this link.  A previously unheard of firm, Cerium Pharmaceuticals, from a residential address, filing for Orphan Drug Product Designation for Synacthen Depot.  This appeared highly questionable.  Then we looked at the corporate registry for Cerium Pharma, and found Gregg Lapointe of Gaithersburg, Md. 



Gregg Lapointe is a critical person in the history of Questcor.  He was a member of the Questcor Board of Directors during the period that Sigma-Tau Pharmaceuticals was the early venture backer for Questcor.  Then he left the board in 2007 to become CEO of Sigma-Tau , which is a large, privately held European-based (but with US headquarters in Gaithersburg, Md)  pharmaceutical company specializing in treating rare diseases: http://en.wikipedia.org/wiki/Sigma-Tau


Then he returned to Questcor with much fanfare in 2009, but declined to stand for re-election to Questcor’s board in 2010.

Gregg Lapointe is a  member of the corporate council of the National Organization for Rare Diseases (NORD), the Child Neurology Foundation and Kidney Care Partners. 

And Questcor’s own words about Mr. Lapointe’s return in 2009:   

“He brings to our Board and shareholders significant pharmaceutical and public company experience, as well as hands on operational familiarity with therapies that treat patients with rare diseases. As we continuously explore additional opportunities for our product, H.P. Acthar® Gel to meet the unmet medical needs of patients, Gregg will bring valuable perspective to our Board. We look forward to working with him again.”

In brief, he was the most medically experienced member of Questcor’s  Board of Directors  … and now he is filing for Synacthen for orphan drug status. 

And he resigned from Sigma-Tau in 2012, the same month he filed the Corporate registration for Cerium in Gaithersburg, Maryland. 

NOTE:  This FDA finding is NOT US approval for Synacthen; it represents the first step in a licensing process.  Synacthen is widely available in Europe, and is very inexpensive.  Its safety profile is well understood because of its availability in the European market for many years.  Its approval in the US will signal the end for Questcor, whose entire financial underpinning is its pricing power for its single high-priced drug, Acthar.   

This conclusively proves that Questcor management is and has been lying when it states its market for Acthar is not imperiled by the appearance of a generic version of Acthar in the US market. 


Oct 19th update:

Questcor update from Humana- Need for Preauthorization- The Walls are Closing in

Humana is now requiring pre-authorization for Acthar reimbursement. 


  • The document is new.  (Revision date Oct 26th, 2012, effective date January 26, 2013)
  • For Acthar, the preauthorization requirement is new – specifically asterisked.  Acthar was not listed on the 2012 version of this document.

It is Citron’s opinion that this is part of a pattern of insurers taking a more restrictive stance on authorization policy with regard to Acthar reimbursement.

These industry-leading insurers may be offering the appearance of being more open about Acthar approval, but Citron has sought opinion of experts (such as a former Blue Cross/Blue Shield Chief Medical Officer) who state that, in practice, these new pre-authorizations set the stage for insurers to frame reimbursement decisions in view of Aetna’s policy and its rationale (lack of clinical evidence, and discussions with thought leaders).

Citron notes that none of the recent round of defenses of the company even mention the ongoing Department of Justice investigation.  It is Citron’s opinion that this investigation remains highly material to the company’s future business prospects.

Neither the company nor analysts seem inclined to update the investing public about any of these changes.  In the next month, insurers will be publishing their reimbursement schedules and policies for 2013.  Citron will continue to update the market about these changes with regard to reimbursement for Acthar prescriptions.  Citron believes these decisions will align with Aetna, who stated that their tightening pre-authorization requirement is based on the lack of clinical evidence for superior efficacy of Acthar to steroid therapies.

   It’s never a problem, until it’s a problem

Oct 17th:

A few weeks ago, another ominous datapoint was disclosed in regard to the status of health insurers’ reimbursement policies for clinical use of Questcor’s primary drug Acthar.   United Healthcare, the largest health carrier in the US, has issued new guidelines for 2013, specifically tightening scrutiny on Acthar, and taking it to the highest of all scrutiny levels



Status change summary : United Healthcare Acthar reimbursement policy
Prior Status for 2012 Tier 3 Medications that offer the least health care value (either clinically and/or financially) than similar medications in their therapeutic classes.  No prior notification of the insurer was required.
New Status for 2013 Tier 3 plus Notification Above definition plus “required to provide additional clinical information to verify member benefit coverage”.  No grandfathering.

Note:  No grandfathering is permitted.   Patients on existing therapy are not exempt.  This adds emphasis to the gravity of the policy change.

This ratchets up scrutiny of Acthar even further — from the most restrictive class of drugs to a case-by-case basis at the largest single health carrier in the United States.

Note:  This is a notification document, not a conditions of coverage document.   Conditions of coverage are proprietary to the company, and might or might not be released.  This document doesn’t specify  the medical conditions under which Acthar is prescribed, but only to the increased scrutiny such prescriptions will be subject to prior to reimbursement.

So here’s what we know:

Best Case Scenario: EVERY prescription for MS and Nephrotic Syndrome get scrutinized on a case by case basis, including each patient’s prior medical records
Worst  Case Scenario: United is aligning with Aetna and leading thinkers from the country’s top clinical institutions to restrict Acthar use because there is no clinical data to support its use, beyond Infantile Spasms. 


Some may spin this as good news – the “nothing is changed” justification – the argument is the company is already accustomed to having to get individual prescriptions approved for reimbursement.

Citron asks:  How can the company justify a growth path when it is obligated to pre-authorize every single prescription by submitting individual patient medical records while under an open investigation from the Department of Justice on its sales and marketing practices ?




It is Citron’s opinion that Questcor is a hand-holding operation on how to skirt insurance company reimbursement procedures and policies, and it is finally catching up with them.   Citron also notes that the sell-side analysts again demonstrate that relying on them to keep abreast of this story is risky.
It is Citron’s opinion that this business model is the very definition of not sustainable, that it should not be conferred valuation predicated on a “customary” multiple, and restates its opinion that it is headed to single digits in the next twelve months.
And worst, why didn’t the company disclose this ?

It’s never a problem, until it’s a problem.


Questcor Update: Aetna Denies Nearly All Coverage for Acthar Gel

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Aetna (NYSE: AET) drops coverage for Questcor’s only drug, for indications now generating 95% of Questcor (NASDAQ:QCOR) revenues. 

HP Acthar Gel for multiple sclerosis and nephrotic symdrome will not be reimbursed. 

   This is not insurance pushback:  This is Insurance Denial.

One of the largest managed care providers in the United States, Aetna has disclosed that after studies and review of scientific literature, it finds no proof of efficacy to substantiate reimbursement for Achtar, except for Infantile Spasms (West Syndrome).

Beginning Friday, September 14 Aetna will cease to offer reimbursement for new patients to use HP Acthar Gel, except for the rare indication of infantile spasms.  

Click for the new Aetna Clinical Policy Bulletin:

( http://www.aetna.com/cpb/medical/data/700_799/0762.html )

Analysts have been defending QCOR over the past week, with claims like this one made as recently as yesterday by Oppenheimer :

“Despite recent speculation about payers looking at Acthar reimbursement with increasing scrutiny, based on comments from management, we believe reimbursement rates to be strong and expect that to continue.”

This statement couldn’t be any more wrong if they tried.  Further, it should be noted that Questcor CEO Bailey sold another $2 million worth of stock last week. 

In Aetna’s assessment of Acthar, we read the one line that says it all:

 “Aetna considers repository corticotropin experimental and investigational for all other indications, because its effectiveness for these indications has not been established.”

Aetna justifies the change in reimbursement by saying:

“This CPB is revised to state that repository corticotropin is considered not medically necessary for corticosteroid-responsive conditions because it has not been proven to be more effective than corticosteroids for these indications.”

Note these words from Aetna.  This was not a decision made because of increasing prices, but rather due to the absence of clinical evidence proving the clinical benefit of Acthar.

Aetna has reached these conclusions based upon a review of currently available clinical information (including clinical outcome studies in the peer-reviewed published medical literature, regulatory status of the technology, evidence-based guidelines of public health and health research agencies, evidence-based guidelines and positions of leading national health professional organizations, views of physicians practicing in relevant clinical areas, and other relevant factors”

Aetna’s medical policy committee composed of internal /external experts within a range of specialties has now come to the same conclusions as the leading experts in Multiple Sclerosis, Nephrotic Syndrome, and Rheumatology from the most respected institutions in the United States. The sales ramp of Acthar has been nothing more than an exploit of inefficiency in the healthcare system, and is not backed by any clinical data to prove its merits beyond the original study supporting its use for Infantile Spasms.

As the managed care companies continuously subject their medical loss ratios to intense scrutiny, Citron expects United Healthcare, WellPoint, and Humana to follow Aetna within the next 12 months, and drop Acthar for all indications except Infantile Spasms.  Aetna will prove to have been the “first domino” in the chain of health insurance reimbursement decisions made by the majors. 

When it comes to operations, joint policies are not uncommon to major managed care programs.  The industry leaders tend to “vote together”, as they most recently did with regard to the anticipated Supreme Court ruling on the new National Health Care Act:  


They have little choice but to present a united front with regard to Questcor.  Otherwise, competing plans place themselves at a significant disadvantage, having to pay expensive claims for a treatment without clinical proof to justify the high expense. 

Did you not expect this would happen eventually?

   Short-Sighted Time Horizon?

Citron previously noted that Questcor can’t be surprised that their day of reckoning was coming.  Every month when they present their prescription data they reassure investors in their 8-K’s:

“Insurance coverage continued to remain favorable for Acthar during June 2012.”

“Insurance coverage to remain favorable for Acthar during July 2012.”

“Insurance coverage continued to remain favorable for Acthar during August 2012.”

That is doublespeak for “keep your fingers crossed — so far so good…”

What are they going to say next month?

When a company claims a “multi-billion dollar market opportunity” entirely based upon on insurance reimbursement, and has to resort to disclosure framed within a month-to-month time horizon, it reveals how fragile the business model truly is.

Shareholders take note:

This decision from Aetna enables all managed care providers to exit the business of overpaying for an expensive legacy drug by placing the burden of proof unequivocally on Questcor.  Acthar reimbursement was not dropped because Aetna asserts Acthar does not work.  Acthar was dropped because there is no clinical data (except for Infantile Spasms) that proves that it does work (any better than steroids). 

So will Questcor now submit Acthar to formal clinical trials to satisfy the managed health care providers?    I think we know that answer.

Was this any surprise?

In the company’s last 10-K, the company clearly states:

Acthar is a high priced drug and the sale of Acthar depends in part on the availability of reimbursement from third-party payors such as private insurance plans. In the United States, there have been, and we expect there will continue to be, a number of state and federal proposals that limit the amount that private insurance plans may pay to reimburse the cost of drugs, including Acthar. We believe the increasing emphasis on managed care in the United States has and will continue to put pressure on the price and usage of Acthar. In addition, current third-party reimbursement policies for Acthar may change at any time. Such changes could include lower reimbursement or the loss of insurance coverage”


This is no longer an argument.  One of the country’s largest managed care providers has drawn the line — years too late in our opinion, but never too late to deliver affordable and efficient healthcare to the American people.  Citron expected Questcor would face insurance “pushback” this year, but we didn’t anticipate that a managed care provider the size of Aetna would just cut it off altogether.  No second line or third line here:  no reimbursement, period. 

Over the past two months we have spoken to numerous shareholders and analysts on Questcor.  It seems as if everyone was in agreement that Acthar was not the “wonder drug” management claimed, but the sales channel and reimbursement program was intact. 

To that we responded, “It is never a problem, until it’s a problem…”  Ladies and gentlemen, it’s official:  IT’S A PROBLEM!

Cautious Investing To All.


A Citron Prescription for Truth on Questcor — with the Documents and Statistics the Company Doesn’t Want You To See!

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Citron publishes  “Questcor (NASDAQ:QCOR):   A Single Digit Stock in 18 Months and Here’s Why”

Everyone knows the old cliché “snake oil salesmen” – hawkers of mysterious preparations promising miracle cures with secret formulations that can’t be made by anyone else.  Such tactics have been outlawed since the Food and Drug Act was signed into law over a century ago.  For very obvious reasons, unsubstantiated claims cannot be made when marketing drugs in the U.S. to doctors or their patients.  Yet Questcor(NASDAQ:QCOR) seems to have no hesitation when it spins its multi-billion dollar “snake oil sales” story – on Wall Street.  Can a company tell one story to doctors and a completely different one to Wall Street?  Apparently, in 2012, the answer is yes.

Let’s be clear:  Citron is not claiming Questcor’s sole drug HP Acthar Gel is “snake oil”.  It is a real drug with a bona fide FDA approval.  The truth is right there in black and white in Questcor’s approval letter from the FDA.  HP Acthar Gel is injectable corticotropin.  It has one active ingredient:  a well known, naturally occurring substance in humans called adrenocorticotropic hormone, or corticotropin, or ACTH for short.

The problem with Questcor as an investment thesis is that this same hormone ACTH has also been approved by the FDA as a generic drug numerous times in the last 60 years – by numerous manufacturers – with essentially the same label for the same conditions.  Through the Freedom of Information Act, Citron has obtained the FDA’s approval history on ACTH.  If you are a Questcor investor, Citron recommends you read these file, which completely negate the “barrier to entry” claims of Questcor’s CEO.  Certainly the numerous analysts “covering” the company’s stock with generous buy recommendations and lofty price targets have not done so – their projections wouldn’t be so optimistic if they did their homework.  On the other hand, it’s nice to be ahead of the Street when you have the chance.

Then there’s the biotech advisory newsletter BioPharmInsight, far from the company-laced propaganda on Wall Street, full of the most eye-popping quotes revealing the realities behind Questcor’s claims about its sole drug Acthar … Citron guarantees Questcor Don Bailey does not want you to read this article — including his own quotes.

So why is Questcor’s CEO saying these crazy things about Acthar?   Because he needs to create the illusion of a barrier-to-entry to justify a purported “multi-billion dollar market opportunity” — when it simply doesn’t exist.

If you are a Questcor investor, “Dr. Citron” prescribes a dose of truth about Questcor, easily digested from the attached .PDF file.  Warning label:  It’s strong medicine.  It includes:

  • a complete workup on the competitive threats that can cause heart seizure for Questcor’s earnings at any time
  • a diagnosis of the insurance industry’s tightening policies on the all-important reimbursement of Acthar Gel, without which Questcor gets no revenue. 
  • an “X-ray” of Questcor management’s indisputable history of printing out and exercising options while the company buys back stock — which might make you want to yell “Clear!”

This presents Citron’s most comprehensive coverage of a US healthcare company since Amedisys (NASDAQ:AMED) and Arthrocare (NASDAQ:ARTC), both of which lost over 80% of their market value when Citron’s stories were borne out by subsequent company admissions.

Citron’s work doesn’t get caught up in the “moral outrage” angle, which is all about history: 

  • how a company takes control of a legacy drug with no market
  • hangs an astronomical price on it
  • launches a high-priced salesforce to sell it
  • and with no new science, no new drug pipeline, and no intellectual property protection …
  • gets its stock caught up with Wall Street’s mo-mo crowd and winds up with a 3.5-billion-dollar valuation. 

For Citron, it’s all about the business, which is about the present and the future…and the truth.  Comprehensive, insightful and detailed — 22 pages in all.  Truth you won’t read anywhere else. 

Make no mistake, Questcor’s business is facing severe headwinds.  As usual, don’t count on the company or the analysts to tell you about them… for that you’ll have to read for yourself….  

Click here for the Whole Story:  Questcor (NASDAQ:QCOR):   A Single Digit Stock in 18 Months and Here’s Why

Cautious Investing to All