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In a setback to Mallinckrodt (MNK), a federal court judge upheld a move by the Centers for Medicare and Medicaid Services to reset a benchmark used for calculating rebates the company must pay to Medicaid for its most important drug, a decision that could cost it $650 million and escalates a heated battle between the drug maker and the federal government.

At issue is the amount of money the company owes CMS for its controversial Acthar Gel treatment, which is used primarily to treat infantile spasms and has been a poster child for the high cost of medicines. Over the past five-plus years, the wholesale price rose 20% and a vial now costs around $39,000, making the drug a large expense for public and private payers.

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