TARS Stock Drops After Culper Research Accuses Tarsus Of Illegal Medicare Copay Scheme

Culper’s central allegation is that Tarsus has driven XDEMVY uptake among Medicare patients by funding copay assistance.

• Culper also alleged that Tarsus inflated its total addressable market estimate.  
• The firm further asserts that Tarsus will miss 2026 guidance.
• Retail traders dismissed Culper’s claims, highlighting its past record of shorting Praxis Precision and Axsome Therapeutics.

Tarsus Pharmaceuticals (TARS) shares fell about 5% on Wednesday after short seller Culper Research revealed its short position in the stock and published a detailed report accusing the company of using questionable practices to drive sales of its sole product, XDEMVY.

The stock is now on track to clock its worst day since April.

Alleged Medicare Copay Scheme

Culper’s central allegation is that Tarsus has driven XDEMVY uptake among Medicare patients by funding copay assistance through the HealthWell Foundation’s blepharitis fund, launched in September 2023— shortly after XDEMVY’s approval. The report claims Tarsus donations, $5.7 million in 2023 and $31.2 million in 2024, closely match the fund’s total receipts, suggesting Tarsus is effectively the sole major donor.

This structure, Culper argues, violates the Anti-Kickback Statute (AKS). Similar copay schemes have led to large DOJ settlements.

The report notes that Tarsus previously disclosed “patient assistance donations” in its earnings as selling, general, and administrative costs before reclassifying the spending. One specialty pharmacy reportedly steers Medicare patients to the fund, and Culper claims 50% of Medicare XDEMVY patients use it.

XDEMVY is the first and only FDA-approved prescription eye drop designed to directly target and kill Demodex mites, the root cause of Demodex blepharitis. It is Tarsus’s sole commercial product.

Inflated Total Addressable Market

Tarsus has touted a 25 million U.S. patient opportunity for Demodex blepharitis, implying peak XDEMVY sales above $2 billion. Culper calls this “wildly inflated.” A survey of 30 current prescribers found only 18% of their patients had the condition, implying a true total addressable market closer to 5 million.

The report contends that Tarsus equates any collarettes, common even in healthy people, with clinical disease and downplays that XDEMVY is a one-time six-week course with limited retreatment. Tarsus has already treated roughly 600,000 of the 1.5 million ever-diagnosed patients. Culper estimates peak annual revenues below $800 million.

Financial Miss Likely

Culper asserts Tarsus will miss 2026 guidance. “Patient assistance” and other SG&A costs are rising sharply and are under-modeled by analysts. Consensus forecasts remain too optimistic, the report says, pointing to ballooning expenses hidden in legal and IT lines.

How Did TARS Retail Traders React?

On Stocktwits, retail sentiment around TARS stock fell from bullish to neutral territory over the past 24 hours, while message volume stayed at high levels.

A Stocktwits user refuted Culper’s claims of a small total addressable market for XDEMVY.

Another user highlighted Culper’s track record, previously shorting Praxis Precision and Axsome Therapeutics, both of which are trading at significant premiums since.

TARS stock has fallen 26% year-to-date. 

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