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Mallinckrodt Pharmaceuticals: From a “New Beginning” to Legal Turmoil

Mallinckrodt Pharmaceuticals, a long-standing player in the pharmaceutical industry, once celebrated its emergence from Chapter 11 reorganization in June of last year. The company appeared poised for a fresh start after agreeing to a significant $1.7 billion settlement to address opioid claims. However, just 13 months later, the optimistic outlook has dimmed significantly. Mallinckrodt is once again facing financial difficulties, including the failure to make its annual $200 million opioid settlement payment, and the specter of bankruptcy looms once more. As the company struggles to regain its footing, investors have filed a class-action lawsuit, alleging false and misleading statements about its financial health.

The Rise and Fall

Founded 156 years ago, Mallinckrodt had experienced considerable success, with revenues exceeding $3 billion between 2016 and 2019. However, its fortunes took a turn for the worse as various missteps and legal issues began to surface. Most notably, the company faced accusations of underpaying Medicaid rebates and using a foundation to pay illegal copay subsidies for its anti-seizure drug Acthar Gel. This led to a $260 million settlement with the U.S. government in 2020. Additionally, the opioid crisis took a heavy toll on the company, with claims related to opioid products resulting in a $1.7 billion settlement.

The Ongoing Legal Struggle

Despite the company’s attempt to recover after the reorganization and settlements, Mallinckrodt’s woes were far from over. Its failure to make the $200 million opioid settlement payment signaled a red flag, and when The Wall Street Journal reported on its financial difficulties and possible bankruptcy consideration, the company’s shares plummeted by 40%. This prompted disgruntled investors to take legal action against Mallinckrodt, alleging that the company’s leadership, including CEO Siggi Olafsson, CFO Bryan Reasons, and Chairman Paul Bisaro, had misled them with false statements about the company’s financial health. The class-action lawsuit targets conference calls, press releases, quarterly earnings reports, and regulatory filings as sources of alleged misleading information.

Consequences and Uncertain Future

The recent developments have further strained Mallinckrodt’s reputation and financial stability. With the class-action lawsuit pending, the company’s leadership faces legal scrutiny, and a court summons requires their appearance within 21 days. If found guilty of making false and misleading statements, the consequences could be severe, affecting the company’s credibility and potentially resulting in substantial fines. Additionally, the specter of bankruptcy looms large, further complicating the company’s ability to navigate its way back to stability.

Mallinckrodt Pharmaceuticals’ journey from a “new beginning” after Chapter 11 reorganization to the current state of financial turmoil and legal challenges is a cautionary tale of the complexities and risks faced by pharmaceutical companies. The company’s inability to fulfill its obligations from the opioid settlement and the subsequent class-action lawsuit alleging misleading statements have cast a shadow on its prospects for recovery. As Mallinckrodt grapples with these issues, the road ahead remains uncertain, and the company’s ability to overcome these challenges will determine its fate in the pharmaceutical industry.


Dr. Oche Otorkpa PG Cert, MPH, PhD

Dr. Oche is a seasoned Public Health specialist who holds a post graduate certificate in Pharmacology and Therapeutics, an MPH, and a PhD both from Texila American University. He is a member of the International Society of Substance Use Professionals and a Fellow of the Royal Society for Public Health in the UK. He authored two books: "The Unseen Terrorist," published by AuthorHouse UK, and "The Night Before I Killed Addiction."
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