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Mallinckrodt to Pay ~$650M After Court Decision in Suit Against HHS, CMS

Mallinckrodt plc (NYSE: MNK), a global biopharmaceutical company, today confirmed that its subsidiary, Mallinckrodt ARD LLC, received a decision from the U.S.

Benzinga · 03/16/2020 10:11

Mallinckrodt plc (NYSE: MNK), a global biopharmaceutical company, today confirmed that its subsidiary, Mallinckrodt ARD LLC, received a decision from the U.S. District Court for the District of Columbia in its suit against HHS and CMS (or the Agency) regarding the company's calculation of Medicaid drug rebates for Acthar® Gel (repository corticotropin injection). The District Court upheld CMS' decision to reverse its previous determination of the base date average manufacturer price (AMP) used to calculate Acthar Gel rebates.

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"This is clearly a disappointing ruling by the District Court. We continue to believe that a bedrock principle of administrative law is that the government is required to give fair notice and a clear, legal basis for a change in position, particularly when that position has been relied upon by a regulated entity like Mallinckrodt," said Mark Casey, Executive Vice President and Chief Legal Officer of Mallinckrodt. "Because we believe the decision's legal reasoning is significantly flawed in several respects, we will move for a stay and reconsideration of the decision with the District Court and, if necessary, appeal to the United States Court of Appeals for the D.C. Circuit. Mallinckrodt remains committed to ensuring Medicaid patients have access to Acthar Gel therapy long term."

In the absence of court intervention and based on the effective date of the ruling and change to the base date AMP, the company will pay roughly$650 million for the period from January 1, 2013 to present, and this will be reflected as a non-GAAP adjustment in the first quarter results. Based on current Medicaid patient volume, Mallinckrodt estimates the annualized prospective change to the Medicaid rebate calculation will reduce Acthar Gel net sales by roughly $90 million to $100 million.

Certain legal contingencies, including the CMS matter, were contemplated in reaching the agreement in principle for a global opioid settlement. The company is engaged in constructive dialogue with the plaintiff parties to address the impact of the District Court's decision.

Mark Casey continued, "A number of contingencies were identified as part of the proposed global opioid settlement. We will continue to work collaboratively with the various parties to the agreement in principle to appropriately consider the District Court ruling and what impact this ruling will have on the terms of the settlement. We remain committed to working with these parties to achieve a satisfactory outcome."

As previously announced on Feb. 25, Mallinckrodt continues to work toward executing its refinancing and exchange transactions to address near term maturities coming due in April 2020 and August 2022, which are key elements of, and conditions to, a global opioid settlement.