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Pharmaceutical Company Mallinckrodt Agrees to Pay More Than $230 Million Nationwide for Underpayment of Medicaid Drug Rebates

June 22, 2022

(Anchorage, AK) – Attorney General Treg Taylor announced that Alaska has recently joined 49 other states, Washington, D.C., Puerto Rico, and the federal government to settle allegations of fraud against Mallinckrodt ARD, LLC (formerly known as Questcor Pharmaceuticals, Inc.), The total value of the settlement is $233,707,865.18, plus interest, to be paid over a period of seven years. Of this amount, Alaska will receive $241,343.20 plus interest.

Mallinckrodt ARD, LLC, is a U.S. subsidiary of the Irish pharmaceutical company Mallinckrodt plc (collectively Mallinckrodt), which sells and markets pharmaceutical products throughout the nation. Mallinckrodt’s U.S. headquarters is located in Bedminster, New Jersey.

The settlement resolves allegations that from January 1, 2013, through June 30, 2020, Mallinckrodt knowingly underpaid Medicaid rebates due for its drug H.P. Acthar Gel (Acthar). The government alleges that Mallinckrodt’s conduct violated federal and state false claims statutes and resulted in the submission of false claims to the Alaska Medicaid program.

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 since 1990 or the year the drug first came to market, whichever is later.

However, the government alleges that Mallinckrodt and its predecessor Questcor began paying rebates for Acthar in 2013 as if Acthar was a “new drug” just approved by the U.S. Food and Drug Administration (FDA), rather than a drug that was first introduced to market in 1952. Allegedly, this practice meant the companies ignored all pre-2013 price increases when calculating and paying Medicaid rebates for Acthar from 2013 until 2020. In particular, the government alleges that Acthar’s price had already risen to more than $28,000 per vial by 2013; therefore, ignoring all pre-2013 price increases for Medicaid rebate purposes significantly lowered Medicaid rebate payments for Acthar. Under the settlement agreement, Mallinckrodt admitted that Acthar was not a new drug as of 2013 but rather was approved by the FDA and marketed prior to 1990. Mallinckrodt agreed to correct Acthar’s base date AMP and that it will not change the date in the future.

As part of the settlement, Alaska will receive $241,343.20 in restitution and other recoveries. The Alaska MFCU, Medical Fraud Control Unit, receives 75 percent of its funding from the U.S. Department of Health and Human Services under a grant award. The remaining 25 percent is funded by the State of Alaska.

This settlement results from a whistleblower lawsuit originally filed in the United States District Court for the District of Massachusetts. The federal government, twenty-six states (including Alaska through its Medicaid Fraud Control Unit) the District of Columbia, and Puerto Rico intervened in the civil action in 2020. The settlement, which is based on Mallinckrodt’s financial condition, required final approval of the U.S. Bankruptcy Court for the District of Delaware, which approved the settlement on March 2, 2022.

A team from the National Association of Medicaid Fraud Control Units participated in the litigation and conducted settlement negotiations on behalf of the states. The team included representatives from the Offices of the Attorneys General for the states of California, Florida, Massachusetts, Michigan, Nevada, New York, Texas, and Wisconsin.

The Alaska MFCU is part of the Alaska Department of Law and is located in Anchorage. It is responsible for investigating and prosecuting Medicaid fraud, abuse, neglect, or financial exploitations of patients in any facility that accepts Medicaid funds. Citizens with information about suspected medical assistance fraud, or patient abuse or neglect are encouraged to contact the Alaska MFCU at its website, or by phone at (907) 269-6279.

CONTACT: MFCU Deputy Director Arne Soldwedel at (907) 269-6279 or arne.soldwedel@alaska.gov at the Office of Special Prosecutions. Copies of MFCU press releases on other matters handled by the Alaska Medicaid Fraud Control Unit can be found at: https://law.alaska.gov/department/criminal/mfcu.html#press

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Department Media Contacts: Communications Director Patty Sullivan at patty.sullivan@alaska.gov or desk (907) 269-6368.

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