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Acting AG Platkin Announces Mallinckrodt Bankruptcy Plan Goes Effective, Resulting in Over a Billion Dollars for New Jersey and Other Public Creditors to Use toward Opioid Abatement

TRENTON – Acting Attorney General Matthew J. Platkin announced today that the State of New Jersey and its eligible subdivisions are to receive approximately $30 million dollars, assuming no prepayment by the company, as part of a multistate opioid settlement with global pharmaceutical maker Mallinckrodt PLC. The settlement addresses the company’s role in helping foment the national opioid crisis. The bulk of the Mallinckrodt settlement dollars will be used to fund opioid abatement efforts across the state.

Historically one of the nation’s highest-volume opioid producers, Mallinckrodt manufactured more than 28.8 billion opioid pills between 2006 and 2012—nearly 38 percent of the opioid market share in the U.S. during that period.

According to the states, Mallinckrodt aggressively marketed its various opioid products while downplaying the addiction and other risks associated with them. The company also funded ostensibly “independent” third-party groups and distributed purportedly “objective” literature that promoted opioid use while ignoring or minimizing the potential harms.

Mallinckrodt filed for bankruptcy in October 2020.  In February of this year, a U.S. Bankruptcy Court judge sitting in Delaware confirmed the company’s Chapter 11 reorganization plan, which contains, among other items, the overall $1.725 billion opioid settlement announced today. Dublin-based Mallinckrodt also needed approval of its bankruptcy reorganization plan from the Irish courts, which has been granted. The reorganization plan became effective on June 16, 2022, allowing the opioid settlement to move forward.

The State has elected to apply the Memorandum of Agreement Between the State of New Jersey and Local Governments on Opioid Litigation Recoveries (“the State Subdivision Agreement”) to the Mallinckrodt bankruptcy plan, and will soon make a filing in the bankruptcy court to that effect.  The State Subdivision Agreement establishes binding terms for the distribution and spending of funds from any national opioid litigation resolution, which may include a bankruptcy plan.  In particular, the Agreement calls for the opioid funds to be divided with 50 percent directly to the State and 50 percent directly to the 262 New Jersey subdivisions eligible for distribution.

“In its chase for profit above all else, Mallinckrodt showed reckless disregard for the law, and for the safety of countless consumers who were misled into believing no harm could come to them from using the company’s opioid products,” said Acting Attorney General Platkin.

“Now that the bankruptcy issues are resolved, Mallinckrodt will pay for the damage they’ve done and we will use the settlement funds to further combat the opioid epidemic.”

“This settlement rightfully holds Mallinckrodt responsible for providing financial resources needed to combat the far-reaching effects of illegal opioid marketing,” said Kelly Levy, Acting Director of the Office of the New Jersey Coordinator for Addiction Responses and Enforcement Strategies (NJ CARES).  “We will use the Mallinckrodt funds to abate the harmful impact the opioid crisis continues to have on the lives of New Jersey residents on a daily basis.”

“Mallinckrodt aggressively pushed its opioid products in the marketplace while using misleading and deceptive messaging about the safety of those products to gain consumer confidence,” said Cari Fais, Acting Director of the Division of Consumer Affairs. “We cannot reverse the harm caused by Mallinckrodt’s saturation of the market with highly addictive painkillers, but this settlement holds them accountable for their irresponsible, greed-driven conduct.”

Mallinckrodt manufactured and sold two branded opioids – Xartemis and Exalgo. The bulk of its opioid sales, however, were generic oxycodone pills – pills that it knew were often being diverted into illicit channels.

Despite this awareness, Mallinckrodt did regular business with rogue distributors that served so-called “pill mills,” and in fact settled drug diversion claims brought against it by the U.S. Drug Enforcement Administration in 2017.

Mallinckrodt was also a client of McKinsey & Company, the worldwide marketing firm that specialized in boosting opioid sales for its pharma clients through hard-charging – and often deceptive – promotional strategies aimed at creating new, larger, and more lucrative opioid markets. McKinsey agreed in 2021 to pay a total of $573 million to resolve a multistate investigation into its own role in fueling the opioid crisis. (New Jersey received $16 million from that settlement.)

In addition to the monetary terms, Mallinckrodt has agreed under today’s settlement to a number of injunctive terms:

  • Among other things, Mallinckrodt is barred going forward from promoting its opioid products, from either rewarding or disciplining employees on the basis of opioid sales, and from providing donations or grants to third parties.
  • Mallinckrodt must share certain clinical data through a third-party data archive to increase the transparency of its clinical research.
  • Mallinckrodt must provide for public access to its documents in perpetuity as part of an industry-wide document disclosure program.
  • In addition, Mallinckrodt has retained an independent monitor who has been monitoring Mallinckrodt’s compliance with the settlement terms, and will continue to do so for at least five years from the October 12, 2020 petition date (the date Mallinckrodt’s Chapter 11 bankruptcy cases were filed).

Owing to a required, post-filing waiting period and the need to complete certain logistical tasks related to fund distribution, New Jersey and the other states do not anticipate receiving the first installment of settlement funds until the fall.

Deputy Attorneys General Lara Fogel, Patricia Schiripo and Jesse Sierant, of the Division of Law’s Affirmative Civil Enforcement Practice Group, and Assistant Attorney General Janine Matton handled the Mallinckrodt matter on behalf of the State.

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