Daily Management Review

Mallinckrodt Files For Chapter 11 Bankruptcy Under Opioid Epidemic Litigation


Mallinckrodt will be paying settlement amounts in instalments over a stretch of several years.

On Monday, October 12, 2020, Mallinckrodt filed for acquiring “bankruptcy protection” as the company weighs under lawsuits that allege it to have facilitated the “U.S. opioid epidemic”. Moreover, in March, the company also lost a court case filed for it to “avoid paying higher rebates to state Medicaid programs for its top-selling drug”.
As per information provided by Mallinckrodt, it has given its consent on paying “$1.6 billion” over a period of several years in an attempt to “settle opioid-related litigation”. In fact, Mallinckrodt would be paying nearly “$450 million” as a portion of its settlement as it comes out of the “chapter 11 bankruptcy”. Following the same, the company is scheduled to pay “$200 million in the first and second year” post the bankruptcy while the next “$150 million” will subsequently be paid over a period of the “seventh year”.
Also the Mallinckrodt showed its consent on paying “$260 million over seven years” in connection with resolving “multiple-sclerosis drug H.P. Acthar gel” related dispute, whereby paying out rebates to the “state Medicaid programs”. Moreover, the company also mentioned that in the month of February, it had made a plans of filing for bankruptcy for its “generic drug business” under a “tentative $1.6 billion opioid settlement” in an attempt to address claims made by “state attorneys general and U.S. cities and counties”.
Furthermore, Mallinckrodt has plans of dismissing its appeal in related to a “March ruling” that deals with Acthar gel, which saw a rise in its per-vial price from being “about $50 in 2001 to $38,892 in 2019”. According to Reuters report:
“During the bankruptcy protection, the company said it aims to resolve opioid-related claims and reduce its debt by about $1.3 billion, while surviving on cash on hand and cash generated from operations”.
The company filed for bankruptcy with the “U.S. Bankruptcy Court for the District Of Delaware” wherein it listed its “assets and liabilities in the range of $1 billion to $10 billion”.