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."