AG Ferguson recovers more than $17 million from opioid manufacturer Mallinckrodt that will be used to address Washington’s opioid epidemic

UPDATE: On May 19, 2022, the office received updated information with respect to Mallinckrodt's bankruptcy. The updated total payments are reflected below.

Today's announcement represents the latest recovery in Ferguson's opioid litigation initiative, which has now delivered more than $730 million to Washington

OLYMPIA - Attorney General Bob Ferguson announced today that bankrupt opioid manufacturer Mallinckrodt will pay Washington at least $17.3 million for its role fueling the opioid epidemic.

Mallinckrodt is one of the largest pharmaceutical manufacturers in the U.S., and manufactured a generic version of oxycodone. Today's announcement represents the latest recovery in Ferguson's opioid litigation initiative, which has now delivered more than $730 million in resources to address Washington's opioid epidemic.

Facing investigations and lawsuits from multiple state attorneys general, including Ferguson, Mallinckrodt filed for bankruptcy in October 2020.

Washington's share of the recovery could total $24.8 million if Mallinckrodt chooses to spread out payments over a longer period of time instead of paying an initial lump sum. Mallinckrodt has 18 months to decide how it will make payments to the state for its role in the opioid epidemic.

Similar to Ferguson's other recent opioid cases, these resources must be used on a set of approved strategies to address the opioid crisis that continues to devastate Washington families. Approved strategies include prevention efforts, expanded treatment options, support for neonatal babies and their families and services for individuals in treatment and recovery.

Additionally, Mallinckrodt will pay Washington $514,702 for underpayment of Medicaid rebates for a drug it produced called "Acthar" as part of the bankruptcy.

"These resources will increase prevention efforts and help Washingtonians in need," Ferguson said. "The corporations responsible for the opioid epidemic must help us address the crisis they created. We will continue to fight to deliver as many resources into our communities as possible."

Mallinckrodt helped fuel the opioid epidemic

Mallinckrodt's corporate headquarters are in Ireland, but it is one of the largest manufacturers of generic drugs in the U.S. It manufactures opioids similar to brand name drugs like oxycodone. A U.S. Drug Enforcement Agency database showed one of its subsidiary companies provided 28.9 billion oxycodone pills across the country from 2006 to 2012, more than 80 for each person in the United States.

In 2020, multiple attorneys general brought legal challenges for Mallinckrodt's underpayments of Medicaid rebates and flooding states with generic opioids. Mallinckrodt will ultimately pay $1.2 to $1.6 billion, depending on its final payment plan, to resolve its liabilities associated with its role fueling the opioid epidemic. Recipients include states, individuals affected by the opioid crisis, and hospitals, among others.

Mallinckrodt will have 18 months from today's decision to decide whether it plans to prepay the claims against it totally, in part or not at all. If the company decides to make no prepayments after emerging from bankruptcy, it will pay on a set schedule for eight years and end up paying a larger amount in total. The Attorney General's Office estimates that Washington will receive approximately $27 million if there is no prepayment. If Mallinckrodt decides to make full prepayment of opioid claims against it, it will pay into a trust immediately and Washington will receive approximately $18 million.

Mallinckrodt's opioid business will be subject to stringent, legally enforceable injunctive relief that, among other things, will prevent marketing and ensure systems are in place to prevent drug misuse.

Mallinckrodt fleeced rebates to Medicaid

A lawsuit filed by the federal government and 32 attorneys general asserted that from Jan. 1, 2013 through June 30, 2020, Mallinckrodt knowingly underpaid Medicaid rebates for a drug it produced called "Acthar." Acthar is not an opioid, but rather a topical gel used for treatment of arthritis, multiple sclerosis or some seizures for children.

Mallinckrodt, and a predecessor company, began paying rebates for Acthar in 2013 as if it was a new and more expensive drug approved by the U.S. Food and Drug Administration. In reality, the drug has existed since 1952. Mallinckrodt then ignored price increases from 2013 through 2020 when calculating and paying Medicaid rebates for Acthar. This significantly lowered rebate payments back into the Medicaid program and Mallinckrodt instead pocketed the rebate money.

Congress enacted the Medicaid Prescription Drug Rebate Program in 1990 as a cost-containment measure for Medicaid's payment for outpatient drugs. This program requires participating pharmaceutical manufacturers to pay rebates to state Medicaid programs for drugs sold to pharmacies that Medicaid later reimburses. For instance, if a pharmaceutical manufacturer increases the price of a drug faster than the rate of inflation, it must then pay the Medicaid program the difference based on the program's internal calculations.

The $514,702 will go into the Medicaid Fraud Penalty Account, which helps support Washington's prescription monitoring program to curb overprescribing of opioids and prevention of Medicaid fraud efforts.

Recent cases holding opioid manufacturers and distributors accountable

On May 3, Ferguson announced that the three largest opioid distributors, McKesson Corp., Cardinal Health Inc. and AmerisourceBergen Drug Corp, will pay Washington $518 million to resolve a six-month trial in King County Superior Court.

Ferguson's decision to take the distributors to trial rather than accept the terms of an earlier settlement with them resulted in Washington receiving $46 million in additional resources. That money will go towards providing substance abuse treatment and supporting other strategies to address the opioid crisis, including housing and other wrap-around services.

In March, Ferguson announced that Washington will receive $183 million to address the opioid crisis as a result of his office successfully leading the challenge to the Purdue bankruptcy plan - $113 million more than Washington would have received under the original deal.

In addition, Ferguson recovered $13.5 million from McKinsey in February 2021 to address harms from the opioid crisis.

In total, the Washington Attorney General's Office has recovered a total of at least $732.5 million from its opioid litigation. That total could increase to as high as $741.5 million depending on Mallinckrodt's final payment plan.

The Washington Attorney General's Office has a trial scheduled against opioid manufacturer Johnson & Johnson in September. As part of his strategy of rejecting national settlements and choosing to litigate, Ferguson also declined to settle with Johnson & Johnson last year.

Resources must be used to combat the opioid epidemic

Similar to Ferguson's other recent opioid cases, these resources must be used on a set of approved strategies to address the opioid crisis that continues to devastate Washington families. Approved strategies for addressing the opioid epidemic include:

• Improving and expanding treatment for opioid use disorder;
• Supporting individuals in treatment and recovery, including providing comprehensive wrap-around services to individuals with opioid use disorder, including housing, transportation, education, job placement, job training, or childcare;
• Addressing the needs of pregnant women and their families, including those with babies with neonatal disorder;
• Preventing opioid misuse, overprescribing, and overdoses through, among other strategies, school-based and youth-focused programs, public education campaigns, increased availability and distribution of naloxone and other drugs that treat overdoses, additional training, enhancements to the prescription drug monitoring program; and
• Supporting first responders.

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Washington's Attorney General serves the people and the state of Washington. As the state's largest law firm, the Attorney General's Office provides legal representation to every state agency, board, and commission in Washington. Additionally, the Office serves the people directly by enforcing consumer protection, civil rights, and environmental protection laws. The Office also prosecutes elder abuse, Medicaid fraud, and handles sexually violent predator cases in 38 of Washington's 39 counties. Visit www.atg.wa.gov to learn more.

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