Mallinckrodt to pay $233 million to settle false claims allegations

Mallinckrodt will pay $233.7 million for allegedly shortchanging Medicaid programs, the Justice Department said Monday.

The federal government in 2020 sued Mallinckrodt, which purchased Questcor Pharmaceuticals in 2014, for forcing Medicaid programs to pay for an unsubstantiated $50 to $28,000 price increase for a vial of Acthar Gel, a treatment for people with certain chronic inflammatory or autoimmune conditions, the complaint alleged.

The drugmaker allegedly underpaid rebates from 2013 to 2020 as required by the Medicaid Drug Rebate Program, which was designed to insulate Medicaid from drug price increases outpacing inflation. Questcor began paying rebates for Acthar in 2013 as if Acthar was a new drug first marketed in 2013—ignoring all pre-2013 price increases when calculating Medicaid rebates, the DOJ alleged.

Under the settlement agreement, Mallinckrodt conceded that there is only one Acthar, that FDA approved Acthar in 1952 and that Acthar was first produced, distributed and marketed prior to 1990.

“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 news release. “Today’s settlement vindicates the interests of the American taxpayer by ensuring that no pharmaceutical manufacturer can illegally boost its profits at the expense of state Medicaid programs, and the people and families those programs serve. This company unlawfully siphoned money out of the Medicaid program which poor people depend on for their medical care.”

Mallinckrodt did not immediately reply to a request for comment.

More than $123 million of the settlement will go to the federal government and $110.1 million will go to several states. Mallinckrodt filed for bankruptcy protection in October 2020 and the bankruptcy court approved the settlement.

HHS’ Office of Inspector General will monitor the pharmaceutical company under a five-year corporate integrity agreement, which contains drug price transparency provisions, Medicaid rebate oversight mandates and patient assistance requirements. Mallinckrodt will establish a risk assessment program, implement executive recoupment provisions and obtain compliance-related certifications from company executives and board members.

The settlement is about 10% of Mallinckrodt’s $2.2 billion 2020 annual revenue.