Court Tells Mallinckrodt to Pay $650M in Back Medicaid Rebates

March 20, 2020 - Global pharmaceutical company Mallinckrodt recently announced that the US District Court for the District of Columbia upheld CMS’ decision over Medicaid rebates for the company’s controversial Acthar Gel.

The announcement earlier this week is in regards to Mallinckrodt ARD LLC’s lawsuit against HHS and CMS surrounding the company’s calculation of Medicaid drug rebates for Acthar Gel. The court supported CMS’ decision to change Medicaid rebate calculations for Acthar Gel resulting in full retroactive payments.

“This is clearly a disappointment ruling by the District Court. We continue to believe that a bedrock principle of administrative law is that the government is required to give fair notice and a clear, legal basis for a change in position, particularly when that position has been relied upon by a regulated entity like Mallinckrodt,” Mark Casey, executive vice principal and chief legal officer of Mallinckrodt said in the announcement.

“Because we believe the decision’s legal reasoning is significantly flawed in several respects, we will move for a stay and reconsideration of the decision with the District Court and, if necessary, appeal to the United States Court of Appeals for the DC Circuit. Mallinckrodt remains committed to ensuring Medicaid patients have access to Acthar Gel therapy long term.”

Mallinckrodt will pay nearly $650 million for the period from January 1, 2013, to present which will be a non-GAAP adjustment in the first-quarter results, the announcement highlighted. The biopharmaceutical company also expects the annualized prospective change to the Medicaid rebate calculation to decrease Acthar Gel sales by $90 million to $100 million.

“A number of contingencies were identified as part of the proposed global opioid settlement. We will continue to work collaboratively with the various parties to the agreement in principle to appropriately consider the District Court ruling and what impact this ruling will have on the terms of the settlement,” Casey continued.

“We remain committed to working with these parties to achieve a satisfactory outcome.”

Mallinckrodt emphasized that it will continue to make an effort to work toward executing its refinancing and exchange transactions to address near term maturities coming due next month and August 2020. These are the main factors and conditions to a recent opioid settlement.

Opioid addiction is an ongoing challenge in the US, with nearly 218,000 Americans dying from overdoses related to prescription opioids from 1999 to 2017.

A study from the University of Pittsburgh Graduate School of Public Health found that gifts from pharmaceutical and medical device companies related to the promotion of opioid medications increased the likelihood of physicians across specialties prescribing opioids to patients.

The study of over 236,000 physicians in November 2019 included Open Payments from 2014 to 2015. It uncovered that primary care physicians were 3.5 times as likely to be in the highest quartile of opioid prescribing if the health system was granted gifts totaling $100 or more.

Additionally, psychiatrists and neurologists were 13 times as likely to be the highest quartile in comparison to others who received less valuable gifts or no gifts at all.

“The opioid epidemic is nowhere close to being over. Yes, in the past year we’ve seen a leveling off in the rates of overdose deaths, but that masks the huge number of people living with opioid use disorder and the impact that high rates of opioid prescribing continue to have,” Marian Jarlenski, PhD, MPH, assistant professor of health policy and management at Pitt Public Health and senior author explained in the study.

Mallinckrodt provided three percent of all opioid-related gifts during the study period. But the pharma company was also accountable for more than half of the value of gifts to surgeons, the announcement stated. This showed the company’s efforts to market to surgeons specifically.

The study also highlighted that Insys and Purdue delivered nearly two-thirds of the value of those gifts from 2014 to 2015. Both of these companies have since settled lawsuits regarding their promotion of opioid medications.