Feds target Mallinckrodt after joining Medicaid rebate suit worth 'hundreds of millions'

Mallinckrodt
Mallinckrodt last month floated a $1.6 billion deal to settle its opioid lawsuits. (Mallinckrodt)

Amid efforts to close a $1.6 billion opioid settlement, Mallinckrodt has fought tooth and nail to escape a massive Medicaid rebate bill for its controversial H.P. Acthar Gel. Instead of ceding ground, the U.S. government opted to take the fight right back to Mallinckrodt––and it could create even more trouble for the embattled drugmaker.

The federal government has joined a False Claims Act whistleblower suit filed in Boston accusing Mallinckrodt of underpaying Medicaid rebates for Acthar by "hundreds of millions of dollars," the U.S. Attorney's Office for the District of Massachusetts said in a release Tuesday.

The government accused Mallinckrodt, which purchased Acthar-maker Questcor Pharma in 2014, of refusing to pay "inflationary rebates" on Acthar despite raising the price of the drug 85,000% between 2001 and 2017. Under the Medicaid Drug Rebate Statute, drugmakers are required to pay back the difference between a drug's price increase each year and the rate of inflation, the attorney's office said. 

Federal prosecutors accused Mallinckrodt of repeatedly refusing to pay past-due rebates dating to 2013 and earlier despite warnings it "could not ignore Acthar’s pre-2013 price increases when paying Medicaid rebates for the drug."

A Mallinckrodt spokesman could not be reached for comment. 

RELATED: See you in court: Mallinckrodt takes on feds to fight $600M in back Acthar rebates

The government's involvement in the Boston suit comes as a bit of a "tag back" after Mallinckrodt in May opted to sue the U.S. Department of Health and Human Services and the Centers for Medicare & Medicaid Services (CMS) for a roughly $600 million back bill on Acthar rebates.

The drugmaker said the government retroactively changed Acthar's average manufacturer price, leaving Mallinckrodt in the lurch with its $500 million effort to "modernize" and expand Acthar's label.

“Despite Mallinckrodt's repeated attempts to engage CMS in a productive discussion to resolve this matter, CMS now seeks to impose an untenable and unlawful position on the company,” the company said at the time. “Mallinckrodt plans to vigorously defend its position."

The current spat is only one in a long line of lawsuits over Acthar, which raised regulators' hackles due to price increases under Questcor and then Mallinckrodt. In 2017, a payer lawsuit accused Mallinckrodt of actively stifling Acthar competition in a move to pump the drug’s list price 85,000% from $40 to more than $36,000 at the time the lawsuit was filed.

Mallinckrodt has argued the vast majority of the drug’s price hikes occurred before it acquired Questcor and that it offers behind-the-scenes discounts and rebates. But Mallinckrodt has also pushed through routine price hikes in the single-digit range in the years since it bought the product.

RELATED: Mallinckrodt floats $1.6B opioid deal, bankruptcy for specialty generics unit

Of course, Mallinckrodt is more likely to fight its Medicaid bill as it works to close a $1.6 billion opioid settlement that will involve the court-supervised restructuring of its specialty generics business.

Late last month, Mallinckrodt reached an "agreement in principle" with a plaintiff's executive committee representing thousands of opioid lawsuits the drugmaker faces in a Cleveland multidistrict litigation as well as 47 state and territory attorneys general, the company said.

To cover its end of the deal, Mallinckrodt said the bankruptcy would reform its generics unit into a public trust, allow for a "channeling injunction" against further opioid lawsuits and grease the skids for a sale of the company's opioid portfolio. 

The drugmaker's bankruptcy offer came just weeks after it closed an out-of-court exchange with an investor to cut nearly $400 million off the business' debt load and months after the company exhausted the remaining $95 million on its revolving credit facility in August.

Mallinckrodt faces not only a possible seven-figure settlement but also mounting debt that could impede its ability pay that agreement off. As an answer, Mallinckrodt said in February it had secured an additional four-year, $800 million loan specifically targeting debt repayment. 

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