Pharmaceutical company Mallinckrodt agreed to pay approximately $260 million as part of a settlement announced Monday by the Department of Justice for underpaying Medicaid rebates and violating kickback laws regarding its drug Acthar.
Of the settlement total, $234.7 million will be paid to resolve the Medicaid rebate allegations and approximately $26.3 million will be paid to resolve the kickback allegations. Mallinckrodt, which filed for bankruptcy protection in October 2020, also entered a five-year corporate integrity agreement with the Department of Health and Human Services Office of Inspector General that will require it to establish a risk assessment program among other stipulations.
The settlement addresses multiple whistleblower lawsuits brought under the qui tam provisions of the False Claims Act, which allow private parties to sue on behalf of the government for the submission of false claims for government funds and to receive a share of any recovery. The whistleblower in the Medicaid rebate case will receive approximately $24.7 million, while whistleblowers that raised the kickback allegations will receive approximately $4.9 million.
The details: Although Acthar was approved in 1952, Mallinckrodt and its predecessor, Questcor Pharmaceuticals, began calculating and paying rebates as if Acthar was a new drug first marketed in 2013, according to the Justice Department. “Allegedly, this practice meant the companies ignored all pre-2013 price increases when calculating and paying Medicaid rebates for Acthar from 2013 until 2020,” the agency stated.
Given Questcor had raised Acthar’s price by more than $28,000 per unit prior to 2013, the government alleged Questcor (and later, Mallinckrodt) avoided paying inflationary rebates on any of those pre-2013 price increases, knowingly avoiding its obligations under the Medicaid Drug Rebate Program.
Regarding the kickback violations, the government alleged Mallinckrodt “knowingly used a foundation as a conduit to pay illegal kickbacks in the form of copay subsidies for Acthar so it could market the drug as ‘free’ to doctors and patients while increasing its price.” The subsidies allowed Mallinckrodt to counteract doctor and patient concerns about the drug’s high cost, according to the Justice Department.
Mallinckrodt separately agreed to pay $15.4 million as part of a settlement with the Justice Department in September 2019 regarding allegations of illegal kickbacks relating to the marketing of Acthar.
Mallinckrodt response: “We disagree categorically with the government’s characterizations but are pleased to have these matters behind the company and note that the settlements contain no admissions of wrongdoing,” the company said in an emailed statement.