(Reuters) – Mallinckrodt Plc filed a lawsuit against the U.S. Department of Health and Human Services and forecast an about 10% hit to annual net sales of Acthar gel following changes to Medicaid rebate calculations, sending its shares plunging as much as 34% on Tuesday.

Acthar, which is used to treat infantile spasms and multiple sclerosis, is the company’s biggest revenue generator, bringing about $1.11 billion in 2018, or 35% of total revenue.

However, its annual sales growth has been slowing since 2016, with analysts predicting another decline in 2019.

The lawsuit also named the health agency’s Centers For Medicare And Medicaid Services (CMS), after the division changed how it calculated Medicaid discounts for Acthar gel.

Mallinckrodt said the change could result in a one-time charge of up to $600 million.

CMS is reviewing the lawsuit, a spokesman told Reuters.

“While it remains to be seen whether Mallinckrodt’s lawsuit will allow it relief from CMS’ ruling, this will be yet another near-term overhang on Acthar,” said Ami Fadia, an analyst with SVB Leerink.

The U.S. Justice Department last month joined a pair of whistleblower lawsuits alleging a drugmaker now owned by Mallinckrodt improperly promoted Acthar and paid kickbacks to doctors who prescribed the treatment.

Mallinckrodt said CMS’ decision could impede its efforts to develop new therapies for patients with fewest treatment options.

Stifel analyst Annabel Samimy said Mallinckrodt will have to adjust its research and development budget, but does not expect the cuts to offset the revenue lost from Acthar sales.

The Medicaid program provides health coverage to low income Americans and is jointly paid for by the states and the federal government.

The company’s shares were trading down 24% at $9.88. Including the session’s loss, Mallinckrodt’s shares have declined about 38% this year.

(Reporting by Aakash Jagadeesh Babu in Bengaluru; Editing by Sriraj Kalluvila)

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