MannKind Corporation (NASDAQ:MNKD) recently struck a deal with Sanofi SA (ADR) (NYSE:SNY) (EPA:SAN) to market its Afrezza inhaled insulin. While that was good news for MannKind, a new lawsuit filed against Sanofi has some questioning whether MannKind has climbed into bed with a shady partner.
Former employee sues Sanofi
A post from Motley Fool (via NASDAQ.com) considers whether investors should be worried about the case against Sanofi. After all, it does relate to how the drug maker markets its products. It also contains some allegations that are similar to a case filed by the Dept. of Justice against Sanofi a few years ago.
This latest case was filed last week by a former employee. She alleges Sanofi fired her after she wouldn’t approve nine contracts worth a total of $34 million because she thought the money was going to be used to pay pharmacists and doctors kickbacks in exchange for prescribing the company’s diabetes drugs.
In this latest case, the employee claims the scheme went all the way up the ladder, with former CEO Christopher Viehbacher allegedly being involved. Sanofi fired him a couple of months ago, although a reason wasn’t provided by the company’s board of directors. The press release seemed to suggest that he wasn’t cooperating with the board closely enough, however, according to Motley Fool.
Sanofi settled Dept. of Justice case
Sanofi settled the previous case that was filed by the DoJ for $109 million. In that case, prosecutors accused the company of giving free samples of arthritis drug Hyalgan to doctors to encourage them to prescribe it. While it’s legal to give free samples to patients who have private insurance, doctors can’t give discounts on them to patients covered by Medicaid or Medicare. The government is concerned the practice will encourage doctors to write prescriptions for drugs patients don’t actually need.
Since doctors themselves must administer Hyalgan, giving them free samples essentially meant they got a lower price when they purchased the drug to give to their patients. However, Medicaid and Medicare reimbursed the price of the drug at full price.
Will the new case affect MannKind?
MannKind stock soared after it was announced that the company had struck a marketing deal with Sanofi, one of the biggest players in diabetes treatment. A partnership between the two companies seemed perfect, as MannKind’s inhaled insulin Afrezza fits in well with the rest of Sanofi’s diabetes drug portfolio.
At this point, Afrezza hasn’t even launched yet and won’t do so until sometime next year. This means MannKind doesn’t have anything to do with the case against Sanofi right now, although it does raise questions about whether Sanofi’s tainted relationship will have a future impact on the company’s drug.
However, it seems unlikely the case will have any real impact on MannKind’s inhaled insulin. The bigger question is whether doctors will even prescribe it, given the warnings regulators ordered MannKind to put on the label. Another question is whether insurance companies will be willing to pay for the drug.
Shares of MannKind edged downward by more than 1% during regular trading today.