Business

MNK Response to Senator McCaskill Letter

June 8, 2017

The Honorable Claire McCaskill
Ranking Member
Committee on Homeland Security and Governmental Affairs United States Senate
Washington, D.C. 20510-6250

Dear Senator McCaskill:

In response to your letter of May 18, 2017, Mallinckrodt is providing additional information that we believe will fully address your information requests regarding the May 2014 price adjustment for OFIRMEV® (acetaminophen) injection, a patented, intravenous form of acetaminophen. We have provided documents and discussed this issue with your staff on at least one previous occasion, and welcome the opportunity to provide additional information through this letter.

OFIRMEV’s Use and Value

OFIRMEV is an effective, non-opioid analgesic used to manage acute pain that, in addition to reducing pain, is proven to significantly reduce opioid consumption across various surgical settings.[i],[ii],[iii]

Retrospective studies also suggest that use of OFIRMEV may be associated with reduced costs to the hospital system and may help improve certain patient outcomes. [iv],[v],[vi]  One recent analysis of health economic data showed that use of OFIRMEV coupled with a one-level reduction in opioid use was linked to shorter hospital stays, reduction of potential opioid-related complications and decreased related costs for the treatment of acute surgical pain. The study showed a potential of $4.7 million in annual savings for a typical, medium-sized hospital.[vii] We have provided additional information on other analyses with this letter. The clinical benefit of reduced opioid consumption with OFIRMEV has not been evaluated nor demonstrated in prospective, randomized controlled trials.

Mallinckrodt’s Ownership, Pricing & Investment

OFIRMEV became part of Mallinckrodt’s portfolio in March 2014, through the acquisition of Cadence Pharmaceuticals. At that time, OFIRMEV, the only product owned by Cadence, had for several years been losing tens of millions of dollars annually, as reflected in Cadence’s public filings with the U.S. Securities and Exchange Commission.[viii] In May 2014, Mallinckrodt sought to stabilize OFIRMEV’s financial situation by increasing the drug’s list price from $14.75 per vial to $35.40 per vial, not including significant customer discount opportunities.

To put that price into context, the quantity of OFIRMEV typically used for a patient undergoing a surgical procedure for which the drug is appropriate is fewer than four vials, or about $150 in cost — again not including discounts. (A full case of OFIRMEV includes 24 vials.[ix]) In contrast, public data indicates that the average payment a hospital receives for these types of surgeries can rise to tens of thousands of dollars per episode.[x]

Since owning the product, Mallinckrodt has made significant investments to support and demonstrate OFIRMEV’s value, including completing half a dozen retrospective health economic and outcomes research studies to provide additional insight for clinicians, pharmacists and hospital administrators on the value of OFIRMEV in acute pain management in the surgical setting. These studies reinforce Mallinckrodt’s commitment to providing hospital customers with high-value products that address the clinical needs of patients.

In 2017, the company launched an innovative “Prove It Out” demonstration program that provides OFIRMEV at a significantly discounted price, enabling hospitals to utilize their own experience to assess the benefits and value of the medicine, including potentially reducing hospital lengths of stay. Moreover, Mallinckrodt’s contracting strategy provides discounts on the purchase of the drug, increasing availability and access to OFIRMEV which is proven to significantly reduce opioid consumption across various surgical settings.

Since the necessary 2014 price reset, any price increases for OFIRMEV have been aligned with Mallinckrodt’s Pledge on Drug Pricing and Innovation, which governs our pricing decisions and is published on our web site. We have previously provided your staff with a copy of the Mallinckrodt Pledge.

BJC Healthcare System

As a long-standing member of the St. Louis community, we were particularly focused on your references to BJC Healthcare (“BJC”), a major Missouri and Southern Illinois hospital system with 15 hospitals and revenues of nearly $5 billion per year.[xi] You noted that BJC estimated that it would have incurred an additional $2.16 million in annual expense related to the May 2014 price adjustment to OFIRMEV. Though we are sensitive to the rising costs of healthcare overall, as noted above, we have published data showing significant potential cost savings and patient benefit for hospitals using OFIRMEV even considering the May 2014 price adjustment.

As BJC indicated to your staff, BJC’s decision to stop using OFIRMEV after the May 2014 price adjustment did not cause them to increase use of opioids in the surgical setting. Instead, BJC chose to use some of the many other non-opioid pain management medications available. Nonetheless, your inquiries to BJC and Mallinckrodt have helped to reinvigorate discussions about the benefits of OFIRMEV use, and Mallinckrodt expects to hold a senior-level meeting with BJC officials within the next 90 days.

Specific Requests Presented in Your Letter

Your May 18 letter presented several specific requests, some of which have been previously addressed with your staff. We have reproduced those requests below and provided responses and, where applicable, attached supporting information.

1.      Any medical journal articles or other research in the possession of Mallinckrodt concerning OFIRMEV as an effective alternative to opioids for the treatment of pain.

Mallinckrodt has compiled a comprehensive dossier about OFIRMEV, including information relating to the product’s clinical and economic benefit. This dossier, which was prepared in accordance with guidelines from the Academy of Managed Care Pharmacy, is intended for use by a pharmacy and therapeutics committee in consideration of adding OFIRMEV to formularies. While there is a large quantity of information contained within the dossier that may be useful, the Executive Summary on pages 14 to 19 of the document may be sufficient to address your request regarding OFIRMEV’s efficacy as an alternative to opioids. We have included the full dossier with this letter, but request that the Committee treat this document as confidential business information.

2.      The number of hospitals that have participated in any Mallinckrodt demonstration programs for OFIRMEV and the number of hospitals that continued and discontinued OFIRMEV use after participating in these programs.

In March 2017, prior to your request for information, and after many months of program design review to ensure compliance with certain legal and regulatory requirements, Mallinckrodt initiated the Prove It Out demonstration project. The demonstration project offers OFIRMEV to participating hospitals at a significantly discounted price, enabling hospitals to utilize their own experience to demonstrate the benefits and value of the medicine, including potentially reducing hospital lengths of stay.

To date we have entered into contract negotiations with nearly a half-dozen hospital systems across the United States, and expect that number to increase significantly over time. In Missouri specifically, we have scheduled or had discussions with at least five hospital systems about joining the Prove It Out Program, and will continue to pursue those opportunities. As a result of the short lifespan of this program, we have not yet ascertained the program’s success or outcomes.

Importantly, as we have stated publicly in in our quarterly earnings reports, the Prove It Out demonstration program comes after OFIRMEV sales had already fully recovered on a national basis from the May 2014 price adjustment. Thus, the Prove It Out demonstration program is an illustration of Mallinckrodt’s commitment to further speed adoption of OFIRMEV as a pain treatment in the surgical setting by directly illustrating to hospitals the financial and patient benefit of OFIRMEV use.

3.      Documents sufficient to show quarterly OFIRMEV unit sales to Missouri hospitals, and resulting revenue, from the date of the Mallinckrodt acquisition of Cadence Pharmaceuticals to present.

Please see the response to request #4.

4.      Documents sufficient to show quarterly OFIRMEV unit sales to Missouri hospitals, and resulting revenue, from January 2011 to the date of the Mallinckrodt acquisition of Cadence Pharmaceuticals, to the extent such records are in the possession of Mallinckrodt.

As Mallinckrodt has stated publicly in quarterly earnings statements and privately to your staff, the effect of the necessary price adjustment to OFIRMEV in May 2014 was a temporary but significant decrease in OFIRMEV sales on a national basis. A significant decline in sales was also realized in Missouri, which was largely the result of several larger health systems transitioning to other pain treatments. For example, one Missouri hospital system, which discontinued use of OFIRMEV after the May 2014 price adjustment, accounted for nearly one-third of all OFIRMEV usage in the state.

While on a national basis OFIRMEV sales have fully recovered to the levels realized before the May 2014 price adjustment, and continue to grow, we have not experienced similar results in Missouri. Mallinckrodt provides contracting opportunities to make discounts available to hospitals based on the purchase of OFIRMEV in all states, including Missouri. These contracting opportunities, including the Prove It Out demonstration program, allow hospitals to recognize the benefit of OFIRMEV for both patients and the overall healthcare system.

As you have requested, we are providing confidential business information that describes OFIRMEV units sold and sales for the state of Missouri on a quarterly basis from the first quarter of 2011 through the first quarter of 2017.[i] This data illustrates that, while there was a significant decline in sales in Missouri following the necessary May 2014 price adjustment, those sales have begun to recover. We expect to see continued improvement in Missouri sales on the basis of contract discounting opportunities for hospitals, implementation of the Prove It Out demonstration program, and other efforts previously described in this letter.

Mallinckrodt’s Work on Opioid Abuse and Prevention

Mallinckrodt is aware of your ongoing investigation into the causes of opioid abuse and misuse. And as you are aware, despite manufacturing only generic and non-promoted opioids, we have broadly supported efforts to combat this healthcare crisis through a range of advocacy initiatives, direct lobbying campaigns, and charitable activities. We take our responsibility as an opioid manufacturer very seriously.

We recognize that the opioid epidemic is a complex and confounding problem, and no one policy initiative or program will solve it. However, as part of our effort to be a part of the solution, Mallinckrodt has invested millions of dollars in its comprehensive program to address opioid abuse and misuse. For many years, Mallinckrodt has been a vocal advocate for the prescription drug monitoring program (PDMP) in Missouri, and has led a coalition of groups to pass legislation in Missouri to implement a PDMP. Moreover, Mallinckrodt has purchased and donated more than 1.5 million drug deactivation pouches, which have been distributed in Missouri communities and across the United States, so families can actively address concerns with the responsible use of pain medications and patient safety.

We work with law enforcement to help prevent misuse and diversion, including by providing no- cost placebo tablets of Mallinckrodt opioids to officers and prosecutors for use in law enforcement operations; attacking drug theft through tracking devices in selected Mallinckrodt drug bottles; and contributing testimony on behalf of the prosecution in drug diversion cases. We also helped to found the Anti-Diversion Industry Working Group, a collective of leading manufacturers and distributors of pharmaceutical controlled substances coming together to collaborate and share best practices with the purpose of exceeding U.S. Drug Enforcement Administration obligations for opioid anti-diversion programs.

To truly make an impact on opioid abuse, all stakeholders must better understand the various interrelated causes and contributors to the problem, and work together to address all of them in a comprehensive, thoughtful manner. We continue to work to be part of the solution.

Conclusion

We appreciate the opportunity to provide information that will help educate policymakers   and the healthcare community about the value of OFIRMEV. We believe that Mallinckrodt’s ownership of OFIRMEV has benefited patients and hospital systems, while also ensuring the financial viability of this important pain therapy.

If you or your staff have additional questions, please contact Mark Tyndall, Vice President of Government Affairs, at (202) 383-0090.

Sincerely,

Michael-Bryant Hicks General Counsel

Cc: The Honorable Ron Johnson, Chairman

 


[iii] Memis D, Inal MT, Kavalci G, Sezer A, Sut N. Intravenous paracetamol reduced the use of opioids, extubation time, and opioid related adverse effects after major surgery in intensive care unit. J Crit Care. 2010;25(3):458-462.

[iv] Brett A. Malese et al., Hospitalization Costs for Patients Undergoing Orthopedic Surgery Treated With Intravenous Acetaminophen (IV-APAP) Plus Other IV Analgesics or IV Opioid Monotherapy for Postoperative Pain, 34 ADVANCES IN THERAPY 421-435 (2017), http://paperity.org/p/78719642/hospitalization-costs-for-patients-undergoing-orthopedic-surgery-treated- with-intravenous 

[v] Ryan N. Hansen et al., Comparative Analysis of Length of Stay, Hospitalization Costs, Opioid Use, and

Discharge Status Among Spine Surgery Patients with Postoperative Pain Management Including Intravenous Versus Oral Acetaminophen, 33 CURRENT MED. RESEARCH & OP. 943-948 (2017), https://dukespace.lib.duke.edu/dspace/bitstream/handle/10161/13943/Hansen%20IV%20vs%20PO%20a cetaminophen.%20CMRO%202017.pdf?sequence=1 

[vi] Ryan N. Hansen et al., Comparative Analysis of Length of Stay and Inpatient Costs for Orthopedic Surgery Patients Treated with IV Acetaminophen and IV Opioids vs. IV Opioids Alone for Post-Operative

Pain, 33 ADVANCES IN THERAPY 1635-1645 (2016), http://download.springer.com/static/pdf/125/art%253A10.1007%252Fs12325-016-0368- 8.pdf?originUrl=http%3A%2F%2Flink.springer.com%2Farticle%2F10.1007%2Fs12325-016-0368- 8&token2=exp=1496767449~acl=%2Fstatic%2Fpdf%2F125%2Fart%25253A10.1007%25252Fs12325-

016-0368-8.pdf%3ForiginUrl%3Dhttp%253A%252F%252Flink.springer.com%252Farticle%252F10.1007%252Fs12 325-016-0368-8*~hmac=b25897f4d4fc1425007c37ccc6e4a7335612ab2a5aee5f6850f514af14b0fa9b

[vii] E. Eve Shaffer et al., Estimating the Effect of Intravenous Acetaminophen for Postoperative Pain Management on Length of Stay and Inpatient Hospital Costs, 33 ADVANCES IN THERAPY 2211-2228 92016), http://download.springer.com/static/pdf/338/art%253A10.1007%252Fs12325-016-0438- y.pdf?originUrl=http%3A%2F%2Flink.springer.com%2Farticle%2F10.1007%2Fs12325-016-0438- y&token2=exp=1496767645~acl=%2Fstatic%2Fpdf%2F338%2Fart%25253A10.1007%25252Fs12325- 016-0438-

y.pdf%3ForiginUrl%3Dhttp%253A%252F%252Flink.springer.com%252Farticle%252F10.1007%252Fs12 325-016-0438-y*~hmac=747a28d298168e1c6b8c81af2e5b15134ea5168d43bf1574bc0bf630f4b31805.

[viii] U.S. Sec. Exch. Comm’n, Form 10-K Cadence Pharm., Inc. (Dec. 31, 2013), https://www.sec.gov/Archives/edgar/data/1333248/000119312514077365/d652543d10k.htm.

[ix] As you have noted in your letter, some media outlets have sought to characterize the OFIRMEV price adjustment in terms of the 24-pack –we believe– to create a more sensational headline. However, the

patient cost, as we note above, is the more appropriate measure to understand the relatively low cost of OFIRMEV in contrast to significant health and economic benefits to patients, hospitals and the healthcare system as a whole.

[xii] Mallinckrodt cannot attest to the accuracy or completeness of any information generated prior to our March 2014 acquisition of Cadence Pharmaceuticals.

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