Colorado recovers nearly $5 million from Mallinckrodt for underpayment of Medicaid drug rebates

July 5, 2022 (DENVER) – Attorney General Phil Weiser today announced that Colorado recovered nearly $5 million in a multistate settlement with Mallinckrodt for the underpayment of Medicaid drug rebates.

The settlement resolves allegations that, from Jan. 1, 2013, through June 30, 2020, Mallinckrodt, a company which sells and markets pharmaceutical products throughout the U.S., knowingly underpaid Medicaid rebates due for its drug H.P. Acthar Gel, a gel that is used for the treatment of chronic inflammation and autoimmune conditions.

“Mallinckrodt illegally reduced the amounts it paid to the state Medicaid program, which poor and vulnerable Coloradans depend on for their medical care,” Weiser said. “Our department is committed to maintaining the financial integrity of the Medicaid program and holding accountable those drug companies that try to undermine critical taxpayer-funded health programs.”

Under the Medicaid Drug Rebate Program, when a manufacturer increases the price of a drug faster than the rate of inflation, it must pay the Medicaid program a per-unit rebate of the difference between the drug’s current price and the price it would be had its price increased at the general rate of inflation since 1990 or the year the drug first came to market, whichever is later. However, Mallinckrodt underpaid that rebate for several years.

Mallinckrodt and its predecessor, Questcor, began paying rebates for Acthar in 2013 as if Acthar was a “new drug” just approved by the U.S. Food and Drug Administration, rather than a drug that was first introduced to market in 1952. This practice would mean that the companies ignored all pre-2013 price increases for Medicaid rebate purposes, thereby significantly lowering Medicaid rebate payments for Acthar. Under the settlement agreement, Mallinckrodt admitted that Acthar was not a new drug as of 2013 but rather was approved by the FDA and marketed prior to 1990. Mallinckrodt agreed to correct Acthar’s base date average manufacturer price and that it will not change the date in the future.

Of the total amount that Colorado recovered, $2.9 million will be returned directly to the Colorado Department of Health Care Policy and Financing. The additional dollars will be returned to the federal government, which also helps fund Medicaid in the states.

This settlement results from a whistleblower lawsuit originally filed in the U.S. District Court for the District of Massachusetts. The federal government, 26 states, the District of Columbia, and Puerto Rico intervened in the civil action in 2020. The settlement, which is based on Mallinckrodt’s financial condition, required final approval of the U.S. Bankruptcy Court for the District of Delaware, which approved the settlement on March 2, 2022.

Colorado is joined in the’s settlement by 48 states, Washington, D.C., Puerto Rico, and the federal government. The total value of the settlement is $233,707,865.18, plus interest, to be paid over a period of seven years.

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