Mallinckrodt
Acthar Gel's price, Medicaid rebate fraud, an FTC monopoly case and two bankruptcies
Mallinckrodt, an Irish-domiciled drugmaker with major US operations, combines two of the most serious types of pharmaceutical controversy. Its specialty drug Acthar Gel became notorious for a price rise of tens of thousands of percent, leading to an FTC monopoly case and a Justice Department fraud settlement. At the same time, as the largest US maker of generic opioids, it faced opioid litigation that drove it into bankruptcy twice.
Questions
Why is Mallinckrodt considered one of the most controversial drug companies?
An FTC monopoly case, a $260 million DOJ fraud settlement, a $1.6 billion opioid liability and two bankruptcies — all centred on a decades-old hormone gel whose price rose from $40 per vial to more than $34,000.
Few companies have been subject to as many different kinds of enforcement. Mallinckrodt (and Questcor, which it bought) paid the FTC $100 million over alleged illegal monopoly maintenance for Acthar Gel; paid the Justice Department about $260 million over Acthar-related Medicaid rebate underpayments and kickbacks; and agreed to a $1.6 billion opioid settlement as the country's largest generic opioid manufacturer, before using a second bankruptcy to cut that obligation.
Q2What is Acthar Gel, and why did its price rise so much?
H.P. Acthar Gel is a 1952-era corticotropin injection used for infantile spasms and serious conditions. By 2020 its per-vial price had risen from $50 to around $40,000, with no clinical innovation behind the increases.
H.P. Acthar Gel is a repository corticotropin injection first introduced in 1952. It is used for infantile spasms, a rare seizure disorder in babies, and as a drug of last resort for other serious conditions. For years it was the only ACTH drug in the US. The FTC said Questcor took advantage of that monopoly to raise the price repeatedly, and that a course of Acthar for infantile spasms could exceed $100,000.
Q3What was the FTC's monopoly case against Mallinckrodt?
The FTC alleged Questcor bought the US rights to a rival ACTH drug — paying $135 million against a rival bid of $16 million — specifically to eliminate the only potential competition to Acthar's monopoly pricing.
In January 2017, Mallinckrodt and Questcor agreed to pay $100 million to settle FTC and state charges that Questcor illegally maintained its monopoly. The FTC alleged that in 2013 Questcor bought the US rights to Synacthen Depot, a synthetic ACTH drug sold abroad at a fraction of Acthar's price, outbidding rivals who planned to develop it and sell it at a large discount. One rival bidder, Retrophin, had bid $16 million while Questcor paid $135 million.
Q4What was the Medicaid rebate fraud case?
The government alleged Mallinckrodt paid Acthar rebates as if it were a drug first marketed in 2013 — resetting the baseline and erasing decades of prior price increases from the calculation, significantly reducing what it owed Medicaid.
Under the Medicaid Drug Rebate Program, when a manufacturer raises a drug's price faster than inflation, it must pay Medicaid an additional rebate calculated from the drug's price when it first came to market. The government alleged that from 2013 Mallinckrodt and Questcor paid Acthar rebates as if it were a new drug first marketed in 2013, rather than one approved in 1952.
Q5What were the kickback allegations involving Acthar?
The DOJ alleged Mallinckrodt paid illegal subsidies through a foundation to cover Medicare copays, effectively presenting Acthar as free to patients while its price kept rising — covering 2010 to 2014.
The same Justice Department resolution included about $26.3 million to settle claims that Mallinckrodt paid illegal subsidies through three funds set up at a foundation to induce Medicare-reimbursed purchases of Acthar, and used those subsidies to counter doctors' and patients' concerns about its cost.
Q6What was Mallinckrodt's role in the opioid crisis?
As the largest US generic opioid manufacturer, Mallinckrodt agreed to pay $1.6 billion into a trust to settle opioid claims — then used a second bankruptcy to cut that obligation to $700 million total.
Through its specialty generics business, Mallinckrodt was the largest generic opioid manufacturer in the United States, producing large volumes of oxycodone and hydrocodone. States and local governments sued it as part of the national opioid litigation. In 2020, Mallinckrodt reached a settlement framework committing it to pay $1.6 billion over eight years into a trust, facilitated by a Chapter 11 filing, and the company's first reorganisation plan took effect in 2022.
Q7Why did Mallinckrodt file for bankruptcy a second time?
Barely a year after its first restructuring, Mallinckrodt filed again in August 2023 — cutting its remaining $1.275 billion opioid trust obligation to a one-time $250 million payment, reducing the total paid from $1.6 billion to $700 million.
In August 2023, barely a year after its first restructuring, Mallinckrodt filed a second prepackaged Chapter 11. According to the Washington Post, the plan allowed it to pay nearly $1 billion less to the opioid trust than originally agreed. The opioid trust explained that with $1.275 billion in deferred payments still owed and the company's finances deteriorating, it faced the prospect of being subordinate to about $3.5 billion in secured debt in an uncontrolled bankruptcy.
Q8What other lawsuits has Acthar generated?
Beyond government enforcement, private payers and investors have sued, with a 2017 class action alleging anticompetitive conduct since 2007 and a $65.75 million shareholder settlement over alleged concealment of Acthar's dependence on federal reimbursement.
Beyond government enforcement, private payers have sued. In April 2017 the City of Rockford, Illinois filed a putative class action on behalf of self-funded entities that paid for Acthar since 2007, alleging Mallinckrodt engaged in anticompetitive, unfair and deceptive conduct to raise and maintain Acthar's price, including by acquiring Synacthen.
Q9Is there good evidence that Acthar works better than cheaper steroids?
Independent researchers at Oregon Health & Science University found no evidence that Acthar is superior to much cheaper steroids — yet Medicare spending on the drug rose tenfold to more than $500 million in 2015 alone.
This is one of the core criticisms of Acthar's use. Researchers at Oregon Health & Science University found no evidence that Acthar is superior to much cheaper forms of steroids. A course of prednisone costs at most a few hundred dollars; an Acthar course can exceed $100,000. One researcher said that a variety of Acthar's FDA-approved indications lack strong evidence that it is effective at all, let alone better than inexpensive corticosteroids.
Q10Did Mallinckrodt pay doctors who prescribed Acthar?
A 2018 study found 88% of frequent Acthar prescribers received payments from Mallinckrodt, with 92,356 payments totalling $15.5 million — a prevalence researchers described as far exceeding the 30–50% typical in similar studies.
A 2018 study found that 88% of the 235 specialists who frequently prescribed Acthar received payments from Mallinckrodt, and 20% received more than $10,000. Using ProPublica's database, the researchers counted 92,356 Acthar-related payments totalling $15.5 million, with each of the top ten recipients receiving between $329,000 and $476,000.
Q11What is the lesson most people draw from Mallinckrodt?
Mallinckrodt shows that the most damaging pricing practices can involve old drugs, not new innovations — and that bankruptcy can be used more than once to limit what companies ultimately pay for mass harms.
Mallinckrodt is often cited as proof that some of the most damaging pricing practices involve old drugs, not new innovations. Acthar had been on the market for decades; its value to shareholders came from buying a monopoly, raising the price, neutralising a potential rival and, according to the government, understating what was owed to Medicaid. The opioid story adds a second lesson: that bankruptcy can limit what companies ultimately pay for mass harms, and can be used more than once.