Drug Manufacturer Mallinckrodt to Pay $1.6 Billion to Settle Opioid Claims

 With executives bailing out and its stock price crashing, opioid maker Mallinckrodt has agreed to pay $1.6 billion in a “settlement framework” as it put the company’s generics unit into Chapter 11 bankruptcy.

The plaintiff’s executive committee negotiated the settlement in MDL 2804 before U.S. District Judge Dan A. Polster in Cleveland, where 2,725 lawsuits are pending in IN RE: National Prescription Opiate Litigation.

Every day, 128 people in the US die after overdosing on opioids. The misuse of prescription pain relievers, heroin, and synthetic opioids like fentanyl—is a national crisis. The Centers for Disease Control and Prevention estimates that the total “economic burden” of prescription opioid misuse alone in the United States is $78.5 billion a year, including the costs of healthcare, lost productivity, addiction treatment, and criminal justice involvement.

A total of 47 state and territory attorneys general approved the framework for the agreement.

“Nothing can undo the devastating loss and grief inflicted by the opioid epidemic upon victims and their families, but this settlement with Mallinckrodt is an important step in the process of healing our communities,” California Attorney General Xavier Becerra said in a statement. “While today’s settlement is a step in the right direction, we’ll continue to work to bring more much-needed relief to families throughout California whose lives have been upended by the opioid crisis.”

Under the terms of its proposed agreement, Mallinckrodt would pay the $1.6 billion over eight years:

  • $300 million after the specialty generics business wraps its restructuring.
  • $200 million in anniversary payments for years one and two.
  • $150 million in anniversary payments for years two through eight.
  • The post-restructuring trust would also receive warrant options to purchase up to 19.99% of the company’s stock at $3.15 per share, Mallinckrodt said.

Mallinckrodt plc, which is based in Ireland and has U.S. offices in St. Louis, said the agreement involves subsidiaries Mallinckrodt LLC, SpecGx LLC, and other affiliates. Neither Mallinckrodt plc nor its “specialty brands” subsidiaries would be part of the bankruptcy.

Facing financial doom

Two Ohio counties, Cuyahoga and Summit, reached a $260 million settlement with Mallinckrodt and three other opioid distributors in October, averting an imminent trial. The counties also reached a $20.4 million settlement with Johnson & Johnson.

Facing financial doom, Mallinckrodt changed its severance policy in September to allow for departing executives to receive lump-sum payouts rather than installments.

In June, the Department of Justice filed criminal kickback charges on Mallinckrodt, which acquired Acthar-maker Questcor Pharma in 2014 for $5.6 billion, accusing the company of funneling money through front funds to illegally subsidize Medicare copays and jack up the drug’s list price by 85,000%.

The charges filed in Pittsburgh federal court took place on the same day the drugmaker agreed in principle to a $15.4 million settlement on separate charges tied to two whistleblower kickback suits the DOJ joined in early May.

Mallinckrodt’s announcement came just after more than 20 attorneys general rejected an $18 billion settlement deal proposed by three of the nation’s biggest opioid distributors. Negotiations are ongoing, as are in talks to settle the claims in the Cleveland case.

“In negotiations, our goal — and the goal of the communities we represent — is to create resource streams into localities that long have, and still are, battling the crisis,” the three co-lead plaintiff lawyers in the Cleveland litigation said in a statement. “Our pursuit of corporate accountability against a host of other defendants across the entire drug supply chain will not stop.”

Next month, numerous drug companies are scheduled to go to trial in New York, and later this year, additional cases are scheduled in West Virginia and Cleveland.

 

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