- Specialty drugmaker Mallinckrodt on Monday filed for bankruptcy protection in U.S. district court, proposing an updated plan to resolve the billions of dollars in opioid drug-related claims the company faces as well as a high-profile federal lawsuit over rebate payments owed to Medicaid.
- Mallinckrodt aims to reduce its debt by $1.3 billion through the plan, parts of which will need bankruptcy court approval. Most of the drugmaker's unsecured creditors, as well as 50 states and territories and a court-appointed committee representing thousands of plaintiffs in the ongoing opioid multi-district litigation, have agreed to the proposed restructuring, the company said.
- Mallinckrodt had contemplated seeking bankruptcy protection earlier this year, but only for the generic drug subsidiary that made the opioid painkillers sold by the pharma. Monday's filing is much broader, involving the Dublin-based parent company and "substantially all of its U.S. subsidiaries."
Mallinkcrodt is the third major opioid manufacturer to file for bankruptcy protection, following Purdue Pharma and Insys Therapeutics.
While less well known than Purdue, Mallinckrodt shipped tens of billions of opioid pills across America between 2006 and 2012, according to data published by The Washington Post, making it one of the largest sellers of the prescription painkillers in the U.S.
The company has also come under Congressional and Department of Justice scrutiny for its high-priced drug Acthar Gel, used to treat a range of diseases including multiple sclerosis, infantile spasms and several rheumatic conditions. Federal lawyers sued Mallinckrodt in March for allegedly understating rebates owed to Medicaid on Acthar Gel.
And in early October, lawmakers on the House Oversight Committee pressed Mark Trudeau, the company's chief executive, on Mallinckrodt's pricing practices for Acthar, which was one of several medicines targeted in the panel's 18-month investigation into "unsustainable" drug prices.
Under the plan proposed Monday, Mallinckrodt would resolve both issues, settling the opioid-related claims for $1.6 billion while paying $260 million to the government and recalculating how it pays Acthar Gel rebates to Medicaid.
The opioid settlement, which has been agreed to in principle, looks similar to an earlier proposal made by Mallinckrodt in February, except the company would pay $650 million into a trust within two years, rather than $400 million. Payments would be completed over seven years instead of eight as a result.
Opioid plaintiffs would also receive warrants for roughly one-fifth of the company's shares, equivalent to some $1.55 billion when exercised.
Across its subsidiaries, Mallinckrodt has more than $650 million in cash on hand, which the company expects can fund business operations when taken together with cash generated from operating activities. The company said it had filed a petition with the court to continue paying employee wages and benefits, but made no mention if any layoffs were envisioned as part of the plan.
Mallinckrodt still plans to separate its generic drug unit from its branded medicines division, a restructuring that the company put on hold last August.