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Missouri Attorney General secures settlement with Mallinckrodt over underpayment of Medicaid Drug Rebates

JEFFERSON CITY, Mo. – Missouri Attorney General Schmitt announced today that Missouri has joined with 49 other states, Washington, D.C., Puerto Rico, and the federal government to settle allegations of fraud against Mallinckrodt ARD, LLC (formerly known as Questcor Pharmaceuticals, Inc.), 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 in Bedminster, New Jersey. The total value of the settlement is $233,707,865.18, plus interest, to be paid over a period of seven years. Of this amount, Missouri’s total Medicaid recovery will be $4,101,750.73, with $2,613,164.02 of that going to the federal government and $1,488,586.71 going directly to Missouri. The Missouri Medicaid program is funded by Missouri and federal funds. When Medicaid funds are recovered they are distributed appropriately to the funding entities.

“The Missouri Attorney General’s Medicaid Fraud Control Unit works to root out fraud in the Medicaid system and hold the perpetrators accountable. In this case, Mallinckrodt was underpaying Medicaid drug rebates and gaming the Medicaid system,” said Attorney General Schmitt. “Through the work of my Office and other attorneys general, Missouri will receive nearly $1.5 million in this case. My Office will continue to work diligently to root out Medicaid fraud and ensure taxpayer money is protected.”

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 the Federal False Claims Act and Section 191.905 of the Revised Statutes of Missouri and resulted in the submission of false claims to the Missouri 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.

The Missouri Attorney General’s MFCU receives 75 percent of its funding from the U.S. Department of Health and Human Services under a grant award totaling $2,958,413.00 for the federal fiscal year 2022. The remaining 25 percent, totaling $968,138.00 for federal fiscal year 2022 is funded by the State of Missouri.

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. Missouri received it’s first payment from Mallinckrodt yesterday.