Attorney General Tong Announces $230 Million Settlement with Mallinckrodt Over Underpayment of Medicaid Drug Rebates(Hartford, CT) -- Attorney General William Tong today announced a $230 million multistate settlement with Mallinckrodt regarding allegations the company knowingly underpaid Medicaid rebates for its drug H.P. Acthar Gel. Connecticut is joined in the settlement by 49 other states, Washington, D.C., Puerto Rico, and the federal government.
The settlement will be paid over a period of seven years. Connecticut will receive $3,891,389.67.
“Mallinckrodt raised its Acthar price and lied about the gel’s status as a ‘new drug’ to avoid paying millions of dollars in rebates to state Medicaid programs. Acting in coordination with our multistate partners and the federal government, we are now holding Mallinckrodt accountable for those false claims and forcing them to pay $230 million,” said Attorney General Tong.
“The Medicaid Drug Rebate Program is an essential part of the Medicaid benefit, making sure that prescription medications are widely available for members of the program,” said Department of Social Services (DSS) Commissioner Deidre S. Gifford, whose agency administers Medicaid in Connecticut. “Pharmaceutical manufacturers who disregard their obligations to pay the required rebates can do substantial harm to this essential program. DSS is grateful for the vigilance and partnership of state and federal partners who continue to ensure honest and fair participation in the program for the benefit of states and the people served by Medicaid.”
“Mallinckrodt’s actions resulted in the company improperly withholding Medicaid Funds needed by our most vulnerable state residents,” said Deputy Chief State’s Attorney of Operations Kevin D. Lawlor. “This collaborative investigative effort between the Attorney General’s office, the Division of Criminal Justice and other state and federal agencies sends a clear message that the improper diversion of Connecticut Medicaid funds will not be tolerated and will result in serious consequences from civil fines, as shown in this case, up to and including possible criminal charges.”
Mallinckrodt ARD, LLC (formerly known as Questcor Pharmaceuticals, Inc.), 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 both the Federal and Connecticut False Claims Act and resulted in the submission of false claims to the Connecticut 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 over $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.
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, 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.
Assistant Attorney General Gregory K. O’Connell and Paralegal Specialist Orlean Woodham, under the supervision of the Chief of the Antitrust and Government Fraud Section Jeremy Pearlman, assisted the Attorney General with this matter.