Violations of healthcare fraud and abuse laws are under much scrutiny and not taken lightly by the government. In recent years, the Department of Justice (DOJ) has been cracking its whip on pharmaceutical manufacturers. On September 4th of 2019 Mallinckrodt ARD LLC (Mallinckrodt) announced that it would be paying a $15.4 million settlement to resolve two whistleblower suits alleging violations of the Anti-Kickback Statute filed under the Whistleblower or Qui Tams provision of the False Claims Act (FCA). A criminal law which prohibits the remuneration or payments which may induce or reward the prescribing or items or services, in this case being a prescription drug reimbursed under federal healthcare programs, would constitute a violation of the FCA. Mallinckrodt’s $15.4 million settlement aims to resolve allegations between 2009-2013 where 12 sales representatives of Questcor Pharmaceuticals, a company which Mallinckrodt acquired in August of 2014 inappropriately induced physicians to prescribe H.P. Acthar Gel (Acthar a drug covered under Medicare) via lavish wining and dining events.
In addition, allegations from the government claim that Mallinckrodt had used a patient assistance foundation as a vehicle to pay illegal kickbacks labeled as copay subsidies to market the Acthar drug. As these allegations have not been resolved by this $15.4 settlement, the government will continue to its efforts to prosecute Mallinckrodt and any such violators of health care abuse and fraud laws.
“When companies buy off doctors, patients suffer. My Office is committed to rooting out this type of behavior and the Anti-Kickback Statute is a critical tool in that fight. We will continue to protect the integrity of our healthcare system by holding drug companies accountable for their conduct.”, said U.S. Attorney McSwain
To make matters worse, Mallinckrodt once again became the focus of a Medicaid Rebate fraud allegation earlier this year in March of 2020. The government alleged that Mallinckrodt once again violated the FCA by underpaying Medicaid rebates owed to the government as a result of increasing the price of its drug Acthar. The Allegations suggest that although Mallinckrodt began marketing Acthar much earlier than 1990, its predecessor, Questcor, had been charging rebates as if Acthar was a new drug marketed in 2013 on the basis that Achtar had received a new drug usage indication in 2010 by the FDA. Questcor, however raised the price of Acthar by over $20,000 per unit even before 2013 and therefore underpaid hundreds of millions dollars in government Medicaid rebates essentially at the expense of American taxpayers.
As a result, Mallinckrodt will pay $260 million over the next 7 years and has also recalculated the price of Acthar’s Medicaid Rebate calculation with a start date of July 1, 2020 allowing Medicaid to collect on 100% of the rebates it is owed based on the current price of Acthar.
With over $275 million in settlements, Mallinckrodt’s financial standings have certainly dropped. Adding further insult to the injury, the company filed for bankruptcy protection Monday Oct 12, amidst a U.S. opioid litigation listing its assets and liabilities somewhere between $1-10 billion. Hoping to resolve opioid related claims via bankruptcy protection, Mallinckrodt aims to reduce its debt by $1.3 billion and will float on its cash on hand from company operations.
Mallinckrodt has made itself a perfect example and a case study illuminating the government’s continued emphasis on combating fraud in the healthcare system furthermore, revealing the massive price tag, tarnished reputation, and battle wounds that come along with violations of the FCA and in general with taking healthcare fraud abuse regulations lightly.