Mallinckrodt Will Appeal District Court Ruling in Case Involving Ongoing Acthar Medicaid Drug Rebate Dispute with the Centers for Medicare and Medicaid Services (CMS)
- Company believes District Court decision misinterprets federal law and fails to address important legal requirements of the Administrative Procedure Act
- Company will immediately appeal to the U.S. Court of Appeals for the D.C. Circuit to overturn District Court decision and block CMS action during appellate process
STAINES-UPON-THAMES, United Kingdom, June 1, 2020 /PRNewswire/ -- Mallinckrodt plc (NYSE: MNK), a global biopharmaceutical company, announced today that it will appeal a ruling by the U.S. District Court for the District of Columbia in a lawsuit filed by its subsidiary, Mallinckrodt ARD LLC, against the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS), regarding the Medicaid drug rebate calculation for Acthar® Gel (repository corticotropin injection).
The District Court denied the Company's request to reconsider its previous decision that declined to declare unlawful an action by CMS to effectuate a change in the base date average manufacturer price used to calculate those rebates. The Court also denied the company's request that it temporarily block CMS' action pending an appeal. The Company will immediately appeal to the U.S. Court of Appeals for the D.C. Circuit, where it will seek to overturn the lower court decision and temporarily block CMS action during the appellate process.
"We are disappointed by the Court's unwillingness to reconsider its previous decision. We believe the Court has misinterpreted the statute that governs the Medicaid drug rebate program and failed to hold the government accountable to a bedrock principle of administrative law that the government must give fair notice and a clear, legal basis for a change in policy, particularly when that policy has been relied upon by a regulated entity such as Mallinckrodt," said Mark Casey, Executive Vice President and Chief Legal Officer of Mallinckrodt. "We plan to immediately appeal to the U.S. Court of Appeals for the D.C. Circuit. Mallinckrodt remains committed to ensuring Medicaid patients have access to Acthar Gel therapy for the long term."
In asking the Court to temporarily block CMS' action, the Company described the risk that allowing CMS to move forward could inhibit the Company's ability to fund research and development activities, including COVID-19 related activities, and effectuate its opioid settlement, among other issues.
As previously announced, in the absence of court intervention, the company would pay roughly $640 million in retroactive non-recurring charges from January 1, 2013 to March 27, 2020, and the annualized prospective change to the Medicaid rebate calculation would reduce Acthar Gel net sales by roughly $90 million to $100 million. Under a previous agreement with the government, CMS has agreed to not enforce a change in the Medicaid drug rebate calculation for Acthar Gel until at least June 14, 2020.
Mallinckrodt ARD LLC is a subsidiary of Mallinckrodt, a global business consisting of multiple wholly owned subsidiaries that develop, manufacture, market and distribute specialty pharmaceutical products and therapies. The company's Specialty Brands reportable segment's areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology, pulmonology and ophthalmology; immunotherapy and neonatal respiratory critical care therapies; analgesics and gastrointestinal products. Its Specialty Generics reportable segment includes specialty generic drugs and active pharmaceutical ingredients.
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CAUTIONARY STATEMENTS RELATED TO FORWARD-LOOKING STATEMENTS
Statements in this document that are not strictly historical, including statements concerning the dispute between Mallinckrodt, HHS and CMS with regard to Medicaid drug rebates for Acthar Gel; the litigation filed by Mallinckrodt against HHS and CMS in connection with this dispute including any related appeals; the impact of such dispute and any such litigation on Mallinckrodt's ability to fund research and development activities (including COVID-19 related activities) or on its ability to effectuate its proposed opioid settlement; the impact of any of the foregoing on Mallinckrodt's future financial condition, operating results, ability to fund future investments in Acthar Gel, and patients' ability to access Acthar Gel; and any other statements regarding events or developments that Mallinckrodt believes or anticipates will or may occur in the future, may be "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, and involve a number of risks and uncertainties.
There are a number of important factors that could cause actual events to differ materially from those suggested or indicated by such forward-looking statements and you should not place undue reliance on any such forward-looking statements. These factors include risks and uncertainties related to, among other things: the dispute between Mallinckrodt, HHS and CMS, including the outcome of the lawsuit filed by Mallinckrodt and any related appeals, as well as the time and expense of litigating this dispute; the impact of this dispute on Mallinckrodt's expectations for performance in 2020, as well as the potential retroactive financial impact on Mallinckrodt of an adverse outcome or any other impacts; governmental investigations and inquiries, regulatory actions and lawsuits brought against Mallinckrodt by government agencies and private parties with respect to its historical commercialization of opioids, including the non-binding agreement in principle regarding terms and conditions of a global settlement to resolve all current and future opioid-related claims; scrutiny from governments, legislative bodies and enforcement agencies related to sales, marketing and pricing practices; pricing pressure on certain of Mallinckrodt's products due to legal changes or changes in insurers' reimbursement practices resulting from recent increased public scrutiny of healthcare and pharmaceutical costs; the reimbursement practices of governmental health administration authorities, private health coverage insurers and other third-party payers; complex reporting and payment obligations under the Medicare and Medicaid rebate programs and other governmental purchasing and rebate programs; cost containment efforts of customers, purchasing groups, third-party payers and governmental organizations; changes in or failure to comply with relevant laws and regulations; Mallinckrodt's and its partners' ability to successfully develop or commercialize new products or expand commercial opportunities; Mallinckrodt's ability to navigate price fluctuations; competition; Mallinckrodt's and its partners' ability to protect intellectual property rights; limited clinical trial data for Acthar Gel; clinical studies and related regulatory processes; product liability losses and other litigation liability; material health, safety and environmental liabilities; potential indemnification liabilities to Covidien pursuant to the separation and distribution agreement; business development activities; retention of key personnel; the effectiveness of information technology infrastructure including cybersecurity and data leakage risks; customer concentration; Mallinckrodt's reliance on certain individual products that are material to its financial performance; Mallinckrodt's ability to receive procurement and production quotas granted by the U.S. Drug Enforcement Administration; complex manufacturing processes; conducting business internationally; Mallinckrodt's ability to achieve expected benefits from restructuring activities; Mallinckrodt's significant levels of intangible assets and related impairment testing; labor and employment laws and regulations; natural disasters or other catastrophic events; Mallinckrodt's substantial indebtedness and its ability to generate sufficient cash to reduce its indebtedness; future changes to U.S. and foreign tax laws or the impact of disputes with governmental tax authorities; the impact of Irish laws; and the impact of the outbreak of the COVID-19 coronavirus.
These and other factors are identified and described in more detail in the "Risk Factors" section of Mallinckrodt's Annual Report on Form 10-K for the fiscal year ended December 27, 2019 and the "Risk Factors" section of Mallinckrodt's Quarterly Report on Form 10-Q for the quarterly period ended March 27, 2020. The forward-looking statements made herein speak only as of the date hereof and Mallinckrodt does not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise, except as required by law.
Daniel J. Speciale, CPA
Vice President, Investor Relations and IRO
Senior Vice President
Senior Vice President, Government Affairs
& Chief Counsel, Litigation
Mallinckrodt, the "M" brand mark and the Mallinckrodt Pharmaceuticals logo are trademarks of a Mallinckrodt company. Other brands are trademarks of a Mallinckrodt company or their respective owners. © 2019 Mallinckrodt. 9/19
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