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First Payments Made Under $233.7 Mallinckrodt False Claims Act Settlement

June 16, 2022

We previously announced the settlement of a False Claims Act case our whistleblower client, James Landolt, filed against Mallinckrodt. The settlement agreement requires Mallinckrodt to pay approximately $233.7 million to resolve claims that it knowingly underpaid Medicaid rebates. Specifically, Mallinckrodt is to pay approximately $123.6 million to the United States and a total of $110.1 million to all 50 states, the District of Columbia, and Puerto Rico.

Mallinckrodt filed for bankruptcy protection in 2020, seeking to reorganize under Chapter 11. Although the bankruptcy court approved the False Claims Act settlement earlier this year, the company was not obligated to make payments until the effective date of its reorganization plan. Mallinckrodt emerged from bankruptcy today. Pursuant to the settlement agreement, Mallinckrodt has made the first of eight installment payments.

The Whistleblower Lawsuit

In 2018, Mr. Landolt alleged that, since 2013, Mallinckrodt had been shirking its rebate obligations on its high-priced drug Acthar.  Acthar cost approximately $50 per 5 ml vial in 2001. Mallinckrodt later increased its price to approximately $40,000. The dramatic price increase required Mallinckrodt to pay much higher rebates to the Medicaid Drug Rebate Program (MDRP).

As the State of Florida explained in its press release announcing the settlement:

Under the Medicaid Drug Rebate Program, when a manufacturer increases the price of a drug faster than the rate of inflation, it must pay the Medicaid program a per-unit rebate of the difference between the drug’s current price and the price of the drug if its price had gone up at the general rate of inflation.

Instead of paying the increased rebates, however, Mallinckrodt reported incorrect pricing data to the government.  It took the position that Acthar – a drug that had been around since the 1950s – somehow became a new drug when the FDA approved its use for a new indication. Mallinckrodt told the MDRP that Acthar was first marketed in 2013 – after the enormous price hikes. Consequently, from 2013 to 2020, Mallinckrodt underpaid hundreds of millions of dollars in Medicaid rebates.

The United States and numerous states intervened in our client’s case in 2020. Mallinckrodt filed for bankruptcy protection later that year.

The Mallinckrodt False Claims Act Settlement

After filing for bankruptcy protection, Mallinckrodt settled the False Claims Act case. Significantly, in the settlement agreement, Mallinckrodt admits that there is only “one Acthar,” which the FDA approved in 1952.

We applaud our client for coming forward to report Mallinckrodt’s actions. His courage and the tremendous work of numerous federal and state attorneys and other officials made this result possible. As the State of California noted in its press release, settlements such as this require coordination and collaboration among government agencies as well as “critical help” from whistleblowers who report fraud.

Mr. Landolt will receive a 20% share of the federal settlement amount and of amounts paid to those states with False Claims Acts. His relator’s share will total approximately $42.8 million over seven years.

Mallinckrodt Is WLC’s Second Large Settlement Involving Rebate Fraud

This is the second major settlement for the Whistleblower Law Collaborative in a Medicaid rebate fraud case. In 2017, Mylan paid $465 million for misclassifying EpiPen® as a generic drug to avoid paying the higher rebates owed on brand name drugs.

The Whistleblower Law Collaborative LLC is a top whistleblower law firm, which devotes its practice entirely to representing clients in bringing actions under the federal and state False Claims Acts and other whistleblower programs. Under the False Claims Act, a private citizen (known as a “relator”) who suspects or knows of fraud against the government can act as a whistleblower and file a sealed complaint on behalf of the government. In addition, a relator in a successful case is entitled to a share of the government’s recovery.  

For more information, contact us at 617.366.2800.  

 

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