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Mallinckrodt files for bankruptcy protection in the US

Bankruptcy filing will reduce debts related to legal liabilities

Irish-domiciled pharma company Mallinckrodt has filed for bankruptcy protection in the US over wide-ranging lawsuits alleging it had an involvement in fuelling the opioid epidemic.

At the beginning of the year, Mallinckrodt reached a tentative settlement agreement in the US over its alleged hand in fuelling the opioid crisis. Within that settlement, Mallinckrodt said it will pay plaintiffs $1.6bn over eight years to mitigate accusations over its involvement in the epidemic.

Yesterday, the Irish company announced that it had voluntarily filed Chapter 11 proceedings in the US Bankruptcy Court for the District of Delaware to restructure its debt and resolve billions of dollars of ‘otherwise unmanageable potential legal liabilities’.

The Chapter 11 petitions include Mallinckrodt as well as all of its US subsidiaries, including its speciality generics-focused business and speciality brands-related business and some of its international subsidiaries.

The bankruptcy filing will reduce Mallinckrodt’s debt by approximately $1.3bn and resolve the opioid-related claims against the company.

In addition to resolving matters relating to the opioid litigation, the bankruptcy filing will also resolve matters related to Mallinckrodt’s Acthar (corticotropin) Gel.

In March, the US government filed a lawsuit against Mallinckrodt claiming that the drugmaker defrauded Medicaid by underpaying rebates owed to the federal health insurance system.

The complainant alleged that Mallinckrodt understated the rebates it was due to pay Medicaid over a period in which it raised the price of its Acthar products, and as a result the company 'knowingly underpaid hundreds of millions of dollars at the expense of American taxpayers'.

Mallinckrodt agreed to pay $260m over seven years to the federal government over the Acthar allegations at the time of the lawsuit filing.

“We are now on a clear path to eliminating legal uncertainties, maximising enterprise value, strengthening our balance sheet and moving ahead with our strategic plans,” said Mark Trudeau, president and chief executive officer of Mallinckrodt.

“At the same time, we remain committed to improving health outcomes and developing and bringing to market therapies for patients with severe and critical conditions,” he added.

Another opioid drugmaker – Purdue Pharma – filed for bankruptcy last year following increasing blame for its part in driving the US opioid epidemic.

The company made vast profits from its prescription painkiller OxyContin, with Purdue facing allegations of dishonest marketing relating to the opioid product as well as violations of the US Food, Drug and Cosmetic Act.

According to the US Department of Health and Human Services, the opioid overdoses accounted for more than 42,000 deaths in 2016, with an estimated 40% of those deaths involving a prescription opioid medication.

Article by
Lucy Parsons

13th October 2020

From: Regulatory

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