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NJ Announces Mallinckrodt to Pay More Than $230M For Alleging Underpayment of Medicaid Drug Rebates

By rlsmetro on


Acting Attorney General Matthew J. Platkin announced that New Jersey 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 located in Bedminster, New Jersey. The total value of the settlement is $233,707,865.18, plus interest, to be paid over seven years. 

Of this amount, New Jersey will receive nearly $2.8 million.

“Mallinckrodt cheated the Medicaid program and taxpayers alike when it attempted to profit by manipulating the system,” said Acting Attorney General Platkin. “We are committed to continuing our work with law enforcement agencies at all levels to bring justice to this type of healthcare fraud.”  

“Let this settlement serve as a warning for companies looking to defraud New Jersey’s Medicaid program,” said Insurance Fraud Prosecutor Tracy M. Thompson. “The Office of the Insurance Fraud Prosecutor is committed to safeguarding taxpayers and protecting public funds by ensuring companies meet their obligations under the Medicaid Drug Rebate Program.”

According to Platkin, 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 The New Jersey False Claims Act and resulted in the submission of false claims to the New Jersey 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.

Platkin states 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 the 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 was approved by the FDA and marketed before 1990. Mallinckrodt agreed to correct Acthar’s base date AMP and that it will not change the date in the future.

New Jersey will receive nearly $2.8 million in restitution and other recoveries as part of the settlement. After fees regarding the relator’s share, State bankruptcy counsel fee, and to be determined pre-settlement and post-settlement interests, a net State share of over $2.2 million will be returned to the State itself.

New Jersey’s Medicaid Fraud Control Unit receives 75 percent of its funding from the U.S. Department of Health and Human Services under a grant award totaling approximately $4.1 million for the Federal fiscal year (“FY”) 2022. 

The remaining 25 percent, totaling approximately $1.3 million for FY 2022, is funded by New Jersey.

This settlement results from a whistleblower lawsuit initially filed in the United States District Court for the District of Massachusetts. 

Based on Mallinckrodt’s financial condition, the settlement required final approval of the U.S. Bankruptcy Court for the District of Delaware, which approved the settlement on March 2, 2022.

DAG Charisse M. Penalver and Assistant Bureau Chief Michael A. Klein of the Office of the Insurance Fraud Prosecutor’s Medicaid Fraud Control Unit handled the Mallinckrodt intervention on behalf of the State.

A team from the National Association of Medicaid Fraud Control Units participated in the litigation and conducted settlement negotiations on behalf of the states. 

The team included representatives from the Offices of the Attorneys General for the states of California, Florida, Massachusetts, Michigan, Nevada, New York, Texas, and Wisconsin.