Mallinckrodt to pay $26.8 million for years of underpayment
Medicaid Drug Reimbursement at the New York Medicaid Program
NEW YORK – New York Attorney General Letitia James announced today that her office has recovered $26.8 million from the drugmaker, Mallinckrodt PLC, and its U.S. subsidiary Mallinckrodt ARD, LLC (Mallinckrodt) , for cheating on Medicaid requirements that help offset rising drug prices. For years, Mallinckrodt underpaid rebates to federal and state Medicaid programs for his drug, HP Acthar Gel (Acthar), which treats many conditions, including multiple sclerosis. The company failed to pay the millions in rebates needed to protect Medicaid programs from price spikes. This agreement resolves claims against the company on behalf of all 50 states, Washington DC, Puerto Rico and the federal government.
“Mallinckrodt ran his business on deception at the expense of ordinary New Yorkers,” said Attorney General James. “Low-income communities depend on Medicaid programs to access affordable, lifesaving health care, and when companies cheat Medicaid programs, they hurt New Yorkers. Mallinckrodt is paying the price for years of cheating Medicaid programs in every state with millions of dollars. Circumventing the law for corporate profit is illegal, and we are committed to protecting New Yorkers from companies that cheat the system. »
In 2020, the federal government and 26 states, Puerto Rico and the District of Columbia filed lawsuits in action against Mallinckrodt after a whistleblower filed a lawsuit against the company for cheating with Medicaid programs. In the multi-state intervening complaint, New York alleged that Mallinckrodt defrauded the state’s Medicaid program and violated New York State’s misrepresentation law.
Under the Medicaid Drug Rebate program, the Medicaid program is protected against certain drug price increases because manufacturers are required to repay these increases in the form of rebates. When a manufacturer increases the price of a drug faster than the rate of inflation, it must pay the Medicaid program a unit rebate equal to the difference between the current price of the drug and the price of the drug if its price had increased at the general price. inflation rate since 1990, or the year the drug came on the market, whichever is later.
The governments alleged in their complaints that beginning in 2013, Mallinckrodt and its predecessor, Questcor, misrepresented Acthar’s approval history with the United States Food and Drug Administration (FDA). In 2013, Mallinckrodt began paying Medicaid rebates for Acthar as if the drug had just been approved rather than as a drug first introduced to the market in 1952. In particular, Mallinckrodt took advantage of the attribution by the FDA of an administrative tracking number to Acthar when this drug was submitted to the FDA for efficacy supplement approval in 2006 to suggest to the federal government that Acthar was a new drug with a new FDA number. Mallinckrodt’s practice meant he ignored all pre-2013 price increases when calculating and paying Medicaid rebates for Acthar from 2013 to 2020, when Mallinckrodt revised his Medicaid reports to pay the correct rebate. The price of Acthar had already risen to more than $23,269 per vial from $1,650 per vial in August 2007. By ignoring all pre-2013 price increases for Acthar, Mallinckrodt significantly reduced its Medicaid reimbursement obligations .
Today’s agreement resolves allegations that, from January 2013 to June 2020, Mallinckrodt knowingly failed to report and return hundreds of millions of dollars in overpayments he received from the Medicaid program for Acthar because he knowingly underpaid the remittances due to the program.
Under the agreement, Mallinckrodt admitted that Acthar was not a new drug as of 2013, but rather had been approved by the FDA in 1952, and said he had revised his reports to the Centers for Medicare & Medicaid Services accordingly. Mallinckrodt has agreed to refrain from changing the relevant date giving rise to its reimbursement obligation for Acthar in the future.
As part of the settlement, New York will receive $16.1 million in restitution and the federal government will receive $10.7 million for New York’s Medicaid program. The Medicaid Fraud Control Unit (MFCU) receives 75% of its funding from the U.S. Department of Health and Human Services in a grant totaling $59,918,216 for fiscal year 2022 The remaining 25%, totaling $14,979,552 for fiscal year 2022, is funded by New York State. Through its recoveries in law enforcement actions, MFCU routinely returns more to the state than it receives in public funding.
The settlement, which is based on Mallinckrodt’s bankruptcy proceeding, required final approval from the U.S. Bankruptcy Court for the District of Delaware, which approved the settlement on March 2, 2022. Mallinckrodt made its first settlement payment today.
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 attorney generals’ offices in New York, California, Florida, Massachusetts, Michigan, Nevada, Texas and Wisconsin.
Senior Auditor-Investigator Meghan Collins and Special Assistant Attorney General Ting Ting Tam of MTCU’s Civil Law Enforcement Division were part of the national team, with assistance from the Deputy Chief of the Enforcement Division of MTCU Civil Laws, Diana Elkind. MTCU’s Civil Law Enforcement Division is led by Chief Alee Scott and Chief Auditor Stacey Millis. MTCU is headed by Director Amy Held and Assistant Deputy Attorney General Paul J. Mahoney, and is part of the Criminal Justice Division. The Criminal Justice Division is headed by Chief Deputy Attorney General José Maldonado and overseen by Senior Deputy Attorney General Jennifer Levy.