Mallinckrodt to pay $15.4M over kickback allegations

News of the enforcement, announced Wednesday, coupled with reports of the drug maker weighing bankruptcy sent Mallinckrodt’s stocks plummeting to an all-time low Thursday. The fine continues a trend of recent DOJ crackdowns on opioid makers.

The penalty is the result of alleged misconduct on the part of 12 sales representatives from Questcor Pharmaceuticals that occurred from 2009 to 2013. Mallinckrodt acquired Questcor in August 2014 and thus assumes liability.

The DOJ alleged the Questor sales representatives provided illegal remuneration to healthcare providers while marketing the drug Acthar Gel with the intent to boost referrals from those providers—a violation of the Anti-Kickback Statute.

“The Department of Justice will hold companies accountable for the payment of illegal kickbacks in any form,” said Assistant Attorney General Jody Hunt of the DOJ’s Civil Division in a statement. “Improper inducements have no place in our federal healthcare system, which depends on physicians making decisions based on the healthcare needs of their patients and not on or influenced by personal financial considerations.”

The fine stems from two cases filed under the whistleblower provision of the False Claims Act; the whistleblowers will receive approximately $2.926 million of the settlement, according to the DOJ. Mallinckrodt remains under investigation for alleged violations of the False Claims Act related to using a foundation as a conduit to pay illegal kickbacks in the form of copay subsidies for Acthar, the DOJ said.

Mallinckrodt, for its part, did not admit to any wrongdoing as part of the settlement.

“We are pleased to have conclusively resolved and put this Questcor matter behind us,” said Mark Casey, general counsel of Mallinckrodt, in a statement. “Where we can resolve legacy legal matters in a reasonable and manageable way, we will continue to do so.”

Opioid makers in the crosshairs

While the opioid crisis continues to wreak havoc across the United States, the DOJ has handed out several enforcements against drug makers this summer, including the following:

• Insys Therapeutics in June agreed to a $225 million global resolution to settle separate criminal and civil investigations concerning deceptive marketing and distribution of its opioid drug, Subsys. Insys subsequently filed for bankruptcy.
• Reckitt Benckiser Group in July agreed to pay $1.4 billion in settlements reached with the DOJ and the Federal Trade Commission to resolve a long-running investigation concerning the sales and marketing of the opioid addiction treatment drug Suboxone.
• Swiss drug maker Novartis announced in July it has set aside $700 million for a potential settlement in a long-running lawsuit over allegations that the company paid hundreds of millions of dollars in kickbacks to doctors to induce them into prescribing drugs to patients to boost their sales.

Further, chief compliance officers have been found personally liable in enforcements as well, including charges of conspiring to distribute controlled substances announced against Miami-Luken in July and charges of knowingly and intentionally violating federal narcotics laws announced against Rochester Drug Co-Operative in April.

Mallinckrodt’s last stand?

Bloomberg on Wednesday cited sources in reporting Mallinckrodt is exploring the option of bankruptcy ahead of federal opioid trials set to begin next month. The report states the drug maker has hired law firm Latham & Watkins and turnaround firm AlixPartners to advise it.

As a result, shares at Mallinckrodt dropped by more than 40 percent within 24 hours.

“While we can’t really comment specifically on any specific rumors, what we can say is like any company hires advisers for all different kinds of things all the time,” Mallinckrodt CEO Mark Trudeau said Thursday at Wells Fargo’s annual healthcare conference in Boston, via CNBC. “Unfortunately, people are putting a whole variety of things together and making assumptions of things completely independent of what we’re trying to do as a company.”