Mallinckrodt bankruptcy judge dismisses insurers’ antitrust complaints


A plaque is displayed at the entrance to the US Bankruptcy Court for the Southern District of New York, REUTERS / Brendan McDermid

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(Reuters) – Mallinckrodt Plc has dismissed claims by insurers accusing the drugmaker of engaging in anti-competitive practices to inflate the price of one of its best products.

U.S. bankruptcy judge John Dorsey in Wilmington, Delaware, ruled in a hearing Monday that insurers, Humana Inc and Attestor, had failed to demonstrate that the high prices of Mallinckrodt’s Acthar gel were the result of illegal maneuvers by the society.

The move came amid a multi-day hearing over the company’s proposed reorganization plan, which would wipe out $ 1.3 billion of its overall debt.

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Mallinckrodt filed for Iowa bankruptcy “}” data-sheets-userformat=”{“2″:513,”3”:{“1″:0},”12″:0}”>Iowa bankruptcy in October 2020 with $ 5.3 billion in funded debt to resolve widespread litigation brought by states, local governments and individuals accusing the company of deceptively marketing opioids.

But, Humana and Attestor’s antitrust claims turned out to be one of the main obstacles to the plan’s approval. Insurers had accused Mallinckrodt of jacking up the price of the gel, which is used to treat childhood spasms and multiple sclerosis, in violation of federal antitrust and bribery laws.

Mallinckrodt has already settled antitrust complaints filed by federal and state governments, which accused him in 2017 of illegally inflating the price of Acthar from $ 40 to over $ 34,000 per vial. The price has since passed $ 39,000 per vial.

Insurers, who were claiming more than $ 300 million in damages, argued that Mallinckrodt not only inflated Acthar’s prices before the bankruptcy, but continued to do so during the case. Since they had to continue to reimburse patients for amounts they deemed illegal, they should be entitled to priority status in Mallinckrodt’s creditors payment structure.

Dorsey said Monday that insurers “have not met their burden of proof.”

The plan confirmation hearing on the remaining issues is expected to last several more days. While most of the creditors and government entities involved in the case back the plan, there are still several outstanding objections that raise issues ranging from the discharge of liability to the treatment of shareholders.

The case is In re Mallinckrodt Plc, United States Bankruptcy Court, District of Delaware, No. 20-12522.

For Mallinckrodt: George Davis, Robert Malionek, Chris Harris, George Klidonas, Andrew Sorkin, Anupama Yerramalli, Jeff Bjork and Elizabeth Marks of Latham & Watkins; and Mark Collins, Robert Stearn Jr, Michael Merchant, Amanda Steele and Robert Maddox of Richards, Layton & Finger

For insurers: Matthew Feldman and Paul Shalhoub of Willkie Farr & Gallagher; Donna Culver and Robert Dehney of Morris, Nichols, Arsht & Tunnell; and Scott Solberg and Benjamin Waldin of Eimer Stahl

Read more:

Antitrust complaints take center stage as Mallinckrodt seeks exit from bankruptcy

Mallinckrodt bankruptcy judge approves start of voting process

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Maria Chutchian reports on bankruptcies and corporate restructurings. She can be reached at [email protected]

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