Pharma giant could miss payment in $1.7B opioid settlement as deal risks unraveling

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To Shannon Saylor

Jun 16, 2023 | 9:44am

The 125-year-old drug giant behind morphine and codeine owed $200 million to the Opioid Victim Compensation Trust by the end of Friday, reportedly in danger of bankrupting the deal. Therefore, payment may be refused.

Mallinckrodt, which began producing morphine, codeine and other potent pain relievers in 1898, will pay $1.7 billion in June 2022 with state and local governments for its role in fueling the overdose epidemic. reached a settlement.

The $200 million to be paid on June 16 is the second payout in the 10-figure scale.

Mallinckrodt has already spent a total of $450 million, which will be distributed to states, hospitals, tribes and individuals affected by the opioid crisis.

But Mallinckrodt is in talks with financial creditors to seek relief from potential defaults if it fails to make timely payments, said a person familiar with the company’s financial plans. wall street journal.

The company has been in financial trouble since being embroiled in a number of opioid-related lawsuits when it was first investigated by the Drug Enforcement Administration (DEA) in 2011 for failing to report suspicious orders. .

DEA records show that Mallinckrodt made 40% of all opioid tablets sold in U.S. pharmacies between 2006 and 2012, during the so-called second wave of the opioid crisis.

Mallinckrodt filed for bankruptcy in 2020 but emerged from Chapter 11 last year with a restructuring plan that included a $1.7 billion settlement in opioid crisis-related lawsuits.

Mallinckrodt still owes $1.25 billion under the opioid plan, which includes exemptions from liability for the company and its executives, the magazine reported.

People familiar with the company said no decision had yet been made on Friday’s payment.

Securities filings as of Thursday morning showed Mallinckrodt decided not to pay $56 million in interest owed to secured bondholders, according to the Times.

Mallinckrodt continues to talk with creditors about a restructuring plan that may be completed in and out of bankruptcy court, according to the documents.

Earlier this month, the Irish-based pharmaceutical company, based in St. Louis in the United States, received a letter from a trust seeking timely payment and threats in the event of default. Reuters report.

The company, which makes powerful pain relievers and branded drugs such as ActaGel for treating multiple sclerosis, was also considering a second bankruptcy filing.

A representative for Mallinckrodt did not immediately respond to the Post’s request for comment.

Don Barrett, an attorney representing the 950 hospitals participating in the settlement, said: bloomberg The failure to pay the multi-billion dollar settlement “is taking money out of hospitals and taking money out of victims,” ​​he said.

But victims are far behind in terms of repayment, and the company’s lenders are at the top of the food chain.

These financiers are also those who argue that Mallinckrodt cannot afford a second multi-million dollar installment and should default in hopes of a better deal.

“I don’t know if parents have the energy to start over,” Kay Scarpone, who lost her son Joseph to an overdose in 2015 after using Mallinckrodt brand opioids, told Bloomberg.

As it stands, the victim’s family has already endured the painful process of collecting death certificates, autopsy reports, old pharmacy prescriptions, rehab information, and other documents proving the use of Mallinckrodt’s products. She said she was unsure if she would be compensated despite the fact that The outlet reported.

“We’re the ones who suffer, but they pay off hedge funds and loans and that money goes there?” It’s very disappointing to sit and watch,” Scarpone said.

In bankruptcy court, Mallinckrodt took a settlement approach similar to that taken by Purdue Pharma and other opioid makers after three waves of the opioid crisis.

The settlement totaled over $50 billion. McKesson, which distributes one-third of all drugs used in the United States, was hit with the most expensive deal at $7.9 billion.

Meanwhile, Bloomberg data showed Mallinckrodt in 11th place, behind Purdue Pharma, Johnson & Johnson, Walgreens, CVS and Walmart.