Mallinckrodt inks $260M settlement with US to resolve Medicaid underpayment and kickbacks allegations


MM Curator summary

[MM Curator Summary]: The drug company depressed rebates it should have paid to Medicaid and set up a foundation to cover member copays when it shouldn’t have.


The article below has been highlighted and summarized by our research team. It is provided here for member convenience as part of our Curator service.


A month after a U.S. bankruptcy court signed off on Mallinckrodt’s reorganization plan, the company has agreed to a $260 million settlement to resolve claims by the Department of Justice surrounding its management of its controversial Acthar Gel drug.

The U.S. said that Mallinckrodt underpaid Medicaid rebates and used a foundation to pay illegal copay subsidies, violating an anti-kickback statute by inducing patients to use the treatment.

The settlement resolves separate cases brought by the government following whistleblower complaints in 2019 and 2020, both involving the popular drug used to curb seizures in children.

The settlement was hastened by the recent decision on Mallinckrodt’s financial condition, which was determined in bankruptcy court in Delaware.

“Mallinckrodt illegally reduced the amounts it paid to state Medicaid programs by improperly calculating the rebates it owed,” U.S. attorney Rachael Rollins said in a statement. “The company unlawfully siphoned money out of the Medicaid program which poor people depend on for their medical care.”

The company resolved (PDF) the Medicaid rebates claim for $234.7 million and took (PDF) care of the kickback claim for $26.3 million. Progressive payments will be spread over seven years.  

“We disagree categorically with the government’s characterizations, but are pleased to have these matters behind the company and note that the settlements contain no admissions of wrongdoing,” a Mallinckrodt said in an emailed statement.

Late last month, the bankruptcy court signed off on a $65.75 million settlement between Mallinckrodt and investors who claimed that the company concealed its reliance for federal reimbursements for Acthar Gel.

In 2020, the drug drew scrutiny from Congress after its price skyrocketed over the last two decades—from $50 per vial to $40,000. Mallinckrodt picked Acthar Gel up in 2014 when it paid $5.8 billion to acquire the drug’s original developer, Questcor Pharmaceuticals.

The Medicaid rebate claims against Mallinckrodt spanned from 2013 to 2020, when the company allegedly underpaid rebates based on its claim that Acthar Gel was a new drug in 2013 when it actually entered the market decades earlier.

The kickback claims spanned from 2010 to 2014, when Questcor was alleged to have partnered with the Chronic Disease Fund to subsidize Medicare copayments to market the drug as “free” while increasing its price.

As part of the settlement, Mallinckrodt will enter a five-year corporate integrity agreement (CIA) that contains unique drug price transparency and monitoring provisions focused on Medicaid and patent assistance program activities.

Mallinckrodt entered bankruptcy because of its mounting liabilities over its alleged role in contributing to the opioid crisis. It agreed to a $1.6 billion settlement to resolve those claims.


Clipped from: