There is a real hubbub about Questcor's (QCOR) drug Acthar going on and a lot of information being bandied about, in support of short and long positions. As of Friday, October 5th, a third bear raid seemed to be in the making, with many headlines indicating United Health Care's (NYSE:UNH) Oxford bulletin 'restricted' or 'limited' Acthar's coverage moving forward.
Most readers will remember that earlier in September, Aetna (NYSE:AET) released a coverage policy bulletin that Citron Research used as a basis for their bear thesis and many readers may also be familiar with Street Sweeper's many articles.
Acthar is a drug that was first approved by the FDA in the 1950s for multiple indications, based on inflammatory and immune system symptoms. In 1978 it was also approved for treating acute MS episodes. In the early 2000s, Questcor bought the rights to Acthar, and obtained an orphan drug designation, for treating West Syndrome (Infantile Spasms).
The designation Orphan Drug may be misleading at first, but it is simply a designation given to drugs that are intended to treat Orphan Diseases. Orphan Diseases have small population groups, that may make it difficult for a company to establish a typical return on investment, if it manufactures the drug.
These policy bulletins require additional information to interpret and determine impact. By themselves, the update may appear to be negative or positive, but how they stack up against the FDA Approved Prescribing Information should be the basis for all analysis.
It is very common for these policies to sit idly, and in a vague form, for years. Like any business, they are dusted off when deemed necessary. I mention this because with the hubbub regarding Acthar, I expect to see more entities releasing clarifications.
Let's focus on UNH's Oxford changes, as UNH is the largest single health carrier in the United States, and one may expect its other entities to release similar updates.
Simply put, Oxford's changes modify their policy to fall in line with the FDA approved prescribing information. Also it makes it easier for MDs to prescribe Acthar, during an exacerbation of a patient that has been previously through a medical review.
But let's go through the changes, one by one, to determine impact.
First change for Multiple Sclerosis;
Changed initial approval period from "3 month initial approval without MD review" to "3 week initial
approval without MD review for new acute exacerbations only."
This is a simple clarification for the MDs, indicating to follow this procedure if it's a new patient. If it's a previously approved patient, please follow the reauthorization process (see second change below).
Initially some analysts viewed this as a negative because of the reduced timeframe. However, doctors should not have been prescribing Acthar for more than 3 weeks, regardless of current insurance company policy.
Acthar is intended to treat acute episodes, and is not a cure, or maintenance drug. Medical Review is being required for new patients as Acthar is a second line medication for those who are either non-responsive to steroid therapy, or have a contraindication to steroids.
This is a neutral change.
Second Change for Multiple Sclerosis;
Changed reauthorization approval period from "MD review required for 6 month reauthorization" to "3
week approval without MD review for new exacerbations; requests for therapy beyond 3 weeks require MD review."
Now that we clarified the earlier 'new patient' procedure, this indicates the Doctor DOES NOT need to contact the insurer for the first 3 weeks of medication, when a patient presents with a re-occurrence/exacerbation. The doctor can just write the script for the patient.
If after 3 weeks, the flare up hasn't subsided, then a medical review is necessary, as long term use may result in serious adverse affects.
This falls in line with the FDA Approved Prescribing Information and is a major change to the policy which is positive for everyone involved.
Third change is for Infantile Spasms;
Changed initial approval period from "3 month initial approval without MD review" to "4 week initial approval without MD review."
IS treatment is expected to last 4 weeks and this falls in line with FDA Approved Prescribing Information.
This is a neutral change.
Fourth change is for Infantile Spasms;
Changed reauthorization approval period from "MD review required for 6 month reauthorization" to "MD review required for reauthorization."
Since IS treatment is expected to last 4 weeks, this falls in line with FDA Approved Prescribing Information.
This is a neutral change.
The Oxford Bulletin contain 3 neutral changes, that updates their policies to match prescribing information. It also contains 1 positive change that allows Doctors to prescribe, without medical review, for prior patients with a recurrence of an MS exacerbative episode.
Aetna's bulletin implied that ACTH was not necessarily for use with MS, and efficacy was in question. Oxford just reaffirmed its coverage, and their understood efficacy with MS, by not making medical reviews necessary every step of the way.
The next articles in the Series will begin to examine the Pathology of MS and Acthar's effects, to provide a background for examining the Citron Research and The Street Sweeper's articles.
Disclosure: I am long QCOR. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.