RX Company to pay Kansans $1.28 million after alleged fraud settlement

TOPEKA, Kan. (WIBW) - About $1.28 million is headed to Kansas taxpayers following a settlement with a global pharmaceutical company over alleged Medicaid fraud.

Kansas Attorney General Derek Schmidt says on Friday, June 17, that there has been a settlement in the case against pharmaceutical company Mallinckrodt ARD, LLC. He said the settlement resolves a suit that alleged Medicaid fraud and the underpayment of Medicaid drug rebates.

AG Schmidt noted that the settlement will recover $1.28 million for Kansas taxpayers.

“We continue to work diligently to protect taxpayers and hold accountable those who illegally obtain public funds,” Schmidt said.

Schmidt said the settlement involved all 50 states, Washington, D.C., and the federal government. He said the lawsuit asserted that Mallinckrodt violated the Federal False Claims Act and the Kansas False Claims Act by submitting false claims to the Kansas Medicaid program.

The AG indicated that payments will be made to Kansas over a 7-year period.

Schmidt said the settlement resolves allegations that from Jan. 1, 2013, to June 30, 2020, Mallinckrodt knowingly underpaid Medicaid rebates due for the drug H.P. Acthar Gel (Acthar). He said under the Medicaid Drug Rebate Program when a manufacturer increases the price of a drug faster than the rate of inflation, then the company must pay the Medicaid program a per-unit rebate of the difference between the drug’s current price and the price if it had gone up at the general rate of inflation since 1990 or the year the drug first came to market - whichever is later.

However, Schmidt said the state and federal governments claimed that Mallinckrodt and predecessor Questcor started to pay rebates for Acthar in 2013 as if it were a new drug just approved by the Food and Drug Administration rather than a drug introduced to the market in 1952 - like Acthar. Allegedly, he said the practice meant the companies ignored all pre-2013 price increases when they calculated and paid Medicaid rebates from 2013 to 2020.

In particular, Schmidt noted that the state and federal governments claimed Acthar’s price had already risen to over $28,000 per vial by 2013 - therefore ignoring all pre-2013 price increases for Medicaid rebate purposes significantly lowered Medicaid rebate payments for Acthar.

Under the settlement, the AG said Mallinckrodt admitted that Acthar was not a new drug as of 2013 but was rather approved by the FDA and marketed before 1990. He said Mallinckrodt agreed to correct Acthar’s base date AMP and that it will not change the data in the future.

Schmidt said Kansas was represented during the settlement negotiations by the Medicaid Fraud and Abuse Division of his office. He said the settlement results from a whistleblower lawsuit originally filed in the U.S. District Court for the District of Massachusetts. He said the federal government, 26 states, D.C., and Puerto Rico all intervened in the civil action in 2020.

The settlement, which he said is based on Mallinckrodt’s financial condition, required final approval of the U.S. Bankruptcy Court for the District of Delaware - which was approved on March 2, 2022.

Under Schmidt’s leadership since 2011, he said the AG’s office has recovered more than $1 billion for Kansas consumers and taxpayers.

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