Mallinckrodt reaches tentative $1.6bn opioid settlement

Mallinckrodt, one of the companies at the centre of the opioid epidemic scandal in the US, has reached a tentative settlement agreement in the US over its alleged hand in fuelling the crisis.

The Ireland-domiciled pharma company said in a statement yesterday that it will pay plaintiffs $1.6bn over eight years to mitigate accusations over its involvement in the epidemic.

The money will be used to underwrite the costs of opioid addiction treatments and related efforts in the US, a public health crisis which claimed almost 218,000 lives in the US between 1999 and 2017, according to the Centers for Disease Control and Prevention (CDC).

The settlement was reached with a plaintiff’s executive committee representing the interests of thousands of lawsuits, and was supported by a group of 47 state and US Territory Attorneys General.

Mallinckrodt’s speciality US generics business – which includes its opioid drug franchise – will file for chapter 11 bankruptcy protection as part of the wide-scale agreement.

Earlier this week, The Wall Street Journal reported that Mallickrodt had been considering bankruptcy of its US generics business as it faced a number of opioid lawsuits angling for trial in the near future.

Last September, Mallinckrodt sold off its contract development and manufacturing organisation (CDMO) for $250m to private equity firm H.I.G. Capital. The cash from that sale reaped insufficient funds to combat the creeping lawsuits, culminating in the need for a wider settlement, as proposed and now tentatively agreed.

Mallickrodt is one of the largest manufacturers of generic opioid medications in the US, but is not the first company to file, at least partially, for bankruptcy as a result of myriad accusations.

Privately-owned pharma company Purdue Pharma, which manufactured OxyContin – the drug shouldering much of the blame for the crisis – filed for bankruptcy in September.

As part of an agreement made with a number of plaintiffs, Purdue restructured to form a new company – aptly named NewCo – which will provide opioid overdose reversal medication and addiction treatment medications at no or low costs.

Johnson and Johnson, which became the first company to be found liable in court for fuelling the crisis last year, launched an official appeal against the judgment soon after it was deemed guilty.

"We recognise the opioid crisis is a tremendously complex public health issue and have deep sympathy for everyone affected. We do not believe litigation is the answer and are continuing to work with partners to find solutions," J&J said in a statement.

One such solution was a wide-ranging, $18bn proposal offered by the ‘big three’ US pharma wholesalers – McKesson, AmerisourceBergen and Cardinal Health – although this was wholly rejected by at least 21 US states.

The $18bn cash fund, which would have been delivered over an 18-year period, was insufficient, the states argued.

They maintained that a larger settlement of $22bn to $32bn or a shorter timeframe for payment would be more apt in combatting the epidemic.

As it stands, a number of pharma companies are due to go to trial in New York to face allegations over misconduct in relation to the sale of opioid medication, as well as additional cases which may go forward in West Virginia and Cleveland later this year.