Drowning in litigation, Mallinckrodt becomes third opioid producer to file for bankruptcy
Beset by hundreds of opioid lawsuits and hundreds of millions in payments owed under a recent federal ruling on one of their best-selling drugs, Mallinckrodt, the 150-year-old Irish drugmaker, has filed for Chapter 11 bankruptcy.
Mallinckrodt, a company that once sold more opioids in the US than any other, becomes the third major opioid producer to file for bankruptcy amid a sea of litigation. Purdue Pharma and Insys Therapeutics each filed for bankruptcy last year.
Bankruptcy has become a common tactic for the companies that profited off the opioid epidemic and now face thousands of lawsuits in part, critics say, because it can freeze litigation and leave those litigants competing for payouts with a company’s creditors. Mallinckrodt said they plan to continue with a tentative settlement they reached earlier this year.
Rumors of a Mallinckrodt bankruptcy have swirled for months. In February, the drugmaker agreed to a settlement with most of its litigants, including 47 states and US territories, that would see it pay $1.6 billion to resolve claims over its role in the opioid crisis.
In March, though, a federal court found Mallinckrodt liable for over $600 million in unpaid Medicaid rebates for its top-selling multiple sclerosis drug Acthar Gel. In subsequent court filings and statements, the company said that the ruling jeopardized their ability to pay off the opioid settlement, warning in June they may “have no option but to take drastic and painful measures, up to and including the prospect of bankruptcy.”
The company said today they’ve agreed to pay $260 million to settle Medicaid claims and that they plan to proceed with the $1.6 billion opioid settlement, paying out the latter over 8 years, beginning with a $450 million payout when they emerge from bankruptcy. The parties in the lawsuit will also receive shares worth about 20% of the company.
Mallinckrodt listed between $1 and $10 billion in assets and liabilities. They are hoping to pare down their debt by $1.3 billion.
Unlike Purdue, which is attempting to re-emerge post-bankruptcy as a producer of anti-addiction drugs, Mallinckrodt intends to continue developing new compounds during and post-bankruptcy. Its pipeline, however, has been less than robust in recent years. Their lead experimental compound, the rare kidney disease drug Terlipressin, was rejected by the FDA for a second time last month, after an internal review spotlighted safety concerns and lingering questions over whether the drug was effective.