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Office of the Vermont Attorney General

Vermont Receives $61,000 Settlement with Mallinckrodt for Underpayment of Medicaid Drug Rebates

June 21, 2022

The Attorney General’s Office announced that Vermont joined with 49 other states, Washington, D.C., Puerto Rico, and the federal government to settle allegations of fraud against Mallinckrodt ARD, LLC (formerly known as Questcor Pharmaceuticals, Inc.), which sells and markets pharmaceutical products throughout the nation. The total value of the multistate settlement is more than $233 million, to be paid over a period of seven years. Of the total settlement, Vermont received $61,595.05.

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

However, the government alleges that Mallinckrodt and its predecessor Questcor began paying rebates for Acthar in 2013 as if Acthar was a “new drug” just approved by the U.S. Food and Drug Administration (FDA), rather than a drug that was first introduced to market in 1952. Allegedly, this practice meant the companies ignored all pre-2013 price increases when calculating and paying Medicaid rebates for Acthar from 2013 until 2020. In particular, the government alleges that 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 agreement, Mallinckrodt admitted that Acthar was not a new drug as of 2013 but rather was approved by the FDA and marketed prior to 1990. Mallinckrodt agreed to correct Acthar’s base date average manufacturer price and that it will not change the date in the future.

MFRAU receives 75 percent of its funding from the U.S. Department of Health and Human Services under a grant award totaling $1,057,724 for Federal fiscal year FY 2022. The remaining 25 percent, totaling $352,575 for FY 2022, is funded by the State of Vermont.

Last modified: June 21, 2022