Attorney General Seal

SOUTH DAKOTA AND MALLINCKRODT SETTLE LAWSUIT ALLEGING UNDERPAYMENT OF MEDICAID DRUG REBATES

FOR IMMEDIATE RELEASE:  Thursday, June 16, 2022

PIERRE, S.D. –  The Office of the South Dakota Attorney General announced today that South Dakota has joined with 49 other states, the District of Columbia, Puerto Rico, and the federal government to settle allegations of fraud against Mallinckrodt ARD, LLC (formerly known as Questcor Pharmaceuticals, Inc.), a U.S. subsidiary of the Irish pharmaceutical company Mallinckrodt PLC (collectively Mallinckrodt).  Mallinckrodt’s U.S. headquarters is located in Bedminster, New Jersey, from which they sell and market pharmaceutical products nationwide.

The total value of the settlement is $233,707,865.18, plus interest, to be paid over a seven-year period.  The total settlement amount recovered by South Dakota is $89,172.26, of which $48,636.57 will be retained by the federal government for the federal Medicaid share.  The remaining $40,535.69 will go to the state general fund to offset alleged Medicaid damages in this case.

This settlement resolves allegations from January 1, 2013 through June 30, 2020 that Mallinckrodt knowingly underpaid Medicaid rebates due for its drug H.P. Acthar Gel (Acthar).  The government alleged that Mallinckrodt’s conduct violated the Federal False Claims Act and South Dakota Medicaid Fraud statutes.  This resulted in the submission of allegedly false claims to the South Dakota Medicaid program.

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 of the drug if its price had gone up at the general rate of inflation since 1990 or the year the drug first came to market, whichever is later.

The allegations against Mallinckrodt were that the company began paying rebates for Acthar in 2013 as if it were a “new drug” just approved by the FDA, rather than the reality that Acthar was first introduced to the market in 1952.  This practice meant that the company allegedly ignored all pre-2013 price increases when calculating and paying Medicaid rebates which would have significantly lowered Medicaid rebate payments for Acthar.  Under the settlement agreement Mallinckrodt admits that Acthar was not a new drug as of 2013 but was instead approved by the FDA and marketed prior to 1990.  Mallinckrodt agreed to correct the base date for Acthar and will not change that date in the future.

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 Offices of the Attorneys General for California, Florida, Massachusetts, Michigan, Nevada, New York, Texas, and Wisconsin.  The South Dakota Medicaid Fraud Control Unit and the South Dakota Department of Social Services assisted in recovering the settlement money.  The claims resolved by the settlement are allegations only; there has been no determination of liability.

The South Dakota Medicaid Fraud Control Unit received 75% of its funding from the U.S. Department of Health and Human Services under a grant award totaling $531,980 for Federal Fiscal Year 2022.  The remaining 25%, totaling $177,322, is funded by South Dakota.

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