First big DOJ Pharma settlement of 2022! Mallinckrodt will pay $260 million to settle two cases
Mallinckrodt will pay $260 million to settle two pending DOJ lawsuits.
The first case claimed that Mallinckrodt underpaid Medicaid rebates for Acthar. The government alleged in the complaint that Mallinckrodt and its predecessor Questcor began paying rebates for Acthar in 2013 as if Acthar was a “new drug” first marketed in 2013, rather than a drug that had been approved since 1952. Allegedly, this practice meant the companies ignored all pre-2013 price increases when calculating and paying Medicaid rebates for Acthar from 2013 until 2020. In particular, the government alleged that Acthar’s price had already risen to over $28,000 per vial by 2013, and therefore ignoring all pre-2013 price increases for Medicaid rebate purposes significantly lowered Medicaid rebate payments for Acthar. Under the settlement agreement, Mallinckrodt admitted that Acthar was not a new drug as of 2013. $234.7 million of the settlement amount was to resolve this matter.
The second case is another matter involving payments to a charitable assistance fund that provides copay assistance to patients using government insurance programs. In its complaint, the government alleged that Mallinckrodt knowingly used a foundation as a conduit to pay illegal kickbacks in the form of copay subsidies for Acthar so it could market the drug as “free” to doctors and patients while increasing its price. Mallinckrodt allegedly paid these illegal subsidies through three funds that Mallinckrodt had a foundation set up to induce Medicare-reimbursed purchases of Acthar, and used the subsidies to counteract doctor and patient concerns about the drug’s high cost. $26.3 million of the total settlement was to resolve the charitable assistance claims.
As part of the settlement Mallinckrodt entered into a 5 year CIA. Two sets of whistleblowers will recover $29.6 million as part of the settlement.
Another reminder that once whistleblower litigation begins there is a high likelihood of a substantial settlement.