Wednesday, October 17, 2012

Questcor - When things go from bad to worse - and even worse

A few weeks ago, another huge 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

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 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.   That is proprietary to the company, and might or might not be released.    It doesn't speak at all to 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.

Monday, October 8, 2012