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


“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”

“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.