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Aetna Crushes Questcor: Is There Still Hope?

Questcor shareholders are left picking up the pieces after shares were nearly halved on Wednesday. The drop followed a clinical policy bulletin from insurer Aetna outlining a change in coverage policies for Questcor's flagship drug Acthar.

In an article written shortly after the news, Brenton said that shareholders had a right to be concerned about this issue, particularly the risk that more insurers would follow suit. After all, even though Aetna accounts for only around 5% of paid prescriptions of Acthar, its update largely excludes multiple sclerosis -- by far the most important indication for the drug -- from coverage going forward. If more insurers were to jump on the bandwagon, Acthar shipments could take a cliff dive.

However, Brenton feels slightly more comfortable after listening in on a call hosted by Questcor on Thursday morning. It's never bad to be skeptical of pronouncements from company managements, but in this case there were some valuable details on the dynamics at work with this drug, particularly in the MS indication.

In the following video, Brenton dives into some of that detail, as well as an interesting disclosure Questcor provides on its annual report that could have raised warning flags for investors.

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Brenton Flynn and The Motley Fool have no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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  • Report this Comment On September 23, 2012, at 4:56 PM, Itsawhiz wrote:

    It's normal practice for Insurance companies to deny claims for prescription drugs. So news that they are going to require appeals for the use of the drug in some cases does not come as a surprise. Something to note, if a doctor recommends Acthar for his patient and the insurance company refuses to pay there are possible ramifications that Insurance companies will need to deal with legally. The lost of revenue should be minimal because of Aetna's statement. Also, at this point and soon to change many medicare patients have benefited from the use of Acthar without cost. These rebates are soon to change generating additional revenue. Some sufferers have tried many different methods of treatment and are blessed by the use of this drug to be able to walk again. The main reason it is not a primary treatment is due solely to the cost. It surprises myself as well as many others that investors would make such drastic moves in a stock with news as such. Now I did not own the stock prior to the fall, but I watched closely. Quite frankly, I am surprised that they have not announced an investigation into the stock price manipulation that just occurred. Two purchases for Put options prior to the drop stand out one that made 6.1 million another 671k in ONE day. Not to mention the call options that were sold prior at $35 and $40, which Friday saw unusual volume of over 12,000. Not to fail to mention, TDAmeritrade had no stocks to short by 10am. This stock is heavily invested by Institutional investors that would typically signal pretty tightly held shares. I for one find all this very suspicious. Perhaps even a transfer of ownership of value planned or not. Your article fails to pacify or provide all the information necessary to make a investment choice, besides your OPINION as to why the stock collapsed which I find unsupported.

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