NEW YORK (TheStreet) -- Shares of Mallinckrodt (MNK)  declined by 12% Wednesday following a note from Citron Research claiming that the specialty pharmaceutical business's CEO Mark Trudeau committed fraud by "lying to the investing public about the company's dependence on the Medicare system."

The note claims that although "insurance companies have clamped down on reimbursement, tax-inverted Mallinckrodt has dug deeper into the pockets of taxpayer-funded Medicare to peddle its medically unproven Acthar [Gel drug]."

Acthar is reportedly the most expensive drug reimbursed by Medicare. Citron Research's Andrew Left appeared on this afternoon's "Bloomberg Markets: Americas" to discuss the company and his firm's take on the situation. Citron is short Mallinckrodt stock.

Last year Medicare put together a database that Citron just saw this past week and it showed where all the different spending is going across all the different drugs and pharmaceuticals.

According to the database $650 million was spent on the company's HP Acthar Gel, Left said. Looking at Mallinckrodt's financials you see that 60% of its revenues are coming directly from the government.

"This is in contrast to four years ago, where it was only 25%," Left added. "More importantly, last year on a conference call CEO Trudeau told investors that the government only counts for 25% of spending."

Left says the reason this is important is two-fold, over the last four years there has been pushback against the drug by insurance companies, not due to the price, but because of the "lack of clinical data out there."

"It's amazing, it's the most expensive drug in Medicare with no clinical data," Left said.

BloombergTV anchor Scarlett Fu asked Left if he is concerned that the company may sue him for alleging the securities fraud. During the interview Fu and fellow anchor Julie Hyman pushed Left on this allegation, noting that the language CEO Trudeau used in the conference call Left referenced wasn't explicitly saying that the revenue coming from the government is an overall measurement and not necessarily for that drug.

Left responded that he would love it if Mallinckrodt tried to sue him because he would "love to open discovery into that company."

TheStreet has reached out to Mallinckrodt for comment but has not heard back.  

Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

We rate MALLINCKRODT PLC as a Hold with a ratings score of C+. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we find that the company has favored debt over equity in the management of its balance sheet.

You can view the full analysis from the report here: MNK

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