Mallinckrodt files for Chapter 11 amid escalating legal battles over opioid crisis


New Jersey Pharmaceutical Company and Opioid Manufacturer Mallinckrodt filed for Chapter 11 bankruptcy amid mounting lawsuits alleging the company was involved in fueling the opioid epidemic in the United States.

In an announcement of the proceedings, Mallinckrodt said he is looking for that option to restructure his debt “and resolve several billion dollars of potential legal liabilities otherwise unmanageable.” All of Mallinckrodt’s US subsidiaries will continue to operate during the procedure, including working to supply customers and patients with its pharmaceutical products.

Using the Chapter 11 process will ultimately reduce Mallinckrodt’s total debt by approximately $ 1.3 billion, most of which is attributable to legal fees and obligations.

Additionally, the process is used by the company to not only resolve opioid-related claims against Mallinckrodt and its affiliates, but also to resolve Questions related to Acthar Gel, including a CMS Medicaid rebate dispute in which the company lost a court battle to pay higher rebates to state Medicaid programs for its multiple sclerosis (MS) drug. The price per vial of the drug increased from approximately $ 50 in 2001 to $ 38,892 in 2019, generating approximately 30.1% of the company’s net sales in 2019.

In response to this loss, the company agreed to pay approximately $ 260 million over a seven-year period. The company also reset the Medicaid rebate calculation for Acthar Gel on July 1 of this year so that state Medicaid programs are eligible for 100% rebates on sales of the MS drug.

“After many months of deliberation, negotiation and consideration of alternatives, Mallinckrodt management and board have determined that implementing a Chapter 11 restructuring offers the best opportunity to maximize value. of the business and to position the company for the future in light of the current challenges it faces, “Mallinckrodt President and CEO Mark Trudeau said in a statement.” We have worked diligently on over the past few months to assess all available options to achieve a comprehensive resolution of the significant litigation and debt issues facing our business.Our Restructuring Support Agreement and reached tentative agreements with a key group of claimants opioids, other government parties, and our secured unsecured note holders, we are entering this process in a very organized fashion.

According to Trudeau, the restructuring has opened a “clear path” towards eliminating legal uncertainties while maximizing the value of the company. Trudeau also said it would allow the company to move forward with its strategic plans, but those plans were not explicitly communicated in the release.

In addition, Mallinckrodt agreed to pay $ 1.6 billion into a trust under a new regulation. The trust will be used to fund the fight against the opioid crisis and will include $ 450 million following bankruptcy proceedings, $ 200 million per year on the first and second anniversary of the bankruptcy state of emergency , as well as $ 150 million per year from the third to the seventh anniversary of the emergence of bankruptcy.

Following the news of Mallinckrodt’s Chapter 11 bankruptcy, the company’s shares fell 31.2% in trade. In 2020 alone, the company’s shares fell 78.5%.

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