Acthar Settlement Results in $260M Payment to Resolve DOJ Fraud and Illegal Kickback Allegations

The drug manufacturer Mallinckrodt will pay the U.S. government $260 million to settle a lawsuit over Acthar Gel, which alleged that the manufacturer underpaid Medicaid and received illegal kickbacks through co-pay subsidies.

Acthar gel (repository corticotropin injection) is a treatment prescribed for chronic inflammatory and autoimmune disorders like lupus, rheumatoid arthritis and multiple sclerosis. According to a whistleblower lawsuit filed by an insider at the company, Mallinckrodt defrauded Medicaid and used co-pay charity programs as a disguise for illegal kickbacks.

According to a Justice Department press release issued on March 7, the Acthar settlement agreement will include a payment of $260 million and a five-year corporate agreement to resolve the charges brought against Mallinckrodt back in 2019 and 2020. The agreement has already been approved by the U.S. Bankruptcy Court in Delaware, which is overseeing the company’s reorganization.

“Mallinckrodt illegally reduced the amounts it paid to state Medicaid programs by improperly calculating the rebates it owed,” U.S. Attorney Rachael S. Rollins for the District of Massachusetts said in the press release. “Today’s settlement vindicates the interests of the American taxpayer by ensuring that no pharmaceutical manufacturer can illegally boost its profits at the expense of state Medicaid programs, and the people and families those programs serve. This company unlawfully siphoned money out of the Medicaid program which poor people depend on for their medical care.”

Drug manufacturers pay quarterly rebates to state Medicaid programs, which then covers the drugs for recipients. However, the Justice Department alleges Mallinckrodt, which was once known as Questcor, claimed Acthar was a new drug in 2013. This let the company ignore requirements that it adjust its rebates to reflect cost increases over the years. The Justice Department says Acthar has been approved since 1952, and that claims it was a new drug in 2013 led to underpayments to Medicaid.

The government also claimed Mallinckrodt used a charitable foundation for copay subsidies, which allowed it to market Acthar as “free” to doctors and patients, while still increasing its price. The Justice Department determined these were illegal kickbacks used to induce doctors and patients to prescribe to what was otherwise a fairly expensive drug.

Mallinckrodt’s settlement agreement involves a payment of about $234.7 million to resolve the fraud allegations; including payments of $123.6 million to the U.S. government, and another $110.1 million to the participating Medicaid state programs. The company will also pay $26.3 million to resolve the kickback allegations.

The five-year corporate integrity agreement calls for the company to be transparent in its Medicaid and patient assistance programs and submit to federal monitoring of those programs.

The problems with Acthar Medicaid payments and kickbacks were first brought to the government’s attention through the whistleblower, or qui tam, provisions of the False Claims Act. Three such whistleblower lawsuits were filed, and the whistleblowers will receive a total of about $30 million for bringing the problems to the government’s attention.