Pharma giant delays payment of $1.7 billion opioid deal as deal threatens to fall apart


June 16, 2023 | 9:44

The 125-year-old pharmaceutical giant behind morphine and codeine has reached an agreement to extend the deadline for its $200 million payout to a compensation fund for opioid victims.

Mallinckrodt, which began manufacturing morphine, codeine and other potent painkillers in 1898, reached a $1.7 billion deal in June 2022 with state and local governments over its role in fueling the overdose epidemic .

It owed $200 million on June 16 as the second scheduled payment for the 10-figure sum, but a securities filing filed on the due date now gives the drugmaker an extension through June 23.

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

However, Mallinckrodt is in talks with financial creditors to waive potential defaults if it fails to make the payment on time, sources familiar with the company’s financial planning told the Wall Street Journal.

The pharmaceutical company has struggled financially since becoming embroiled in a series of opioid-related litigation in 2011, when the Drug Enforcement Administration (DEA) first investigated it for failing to report suspicious orders.

Mallinckrodt was ordered to pay $200 million towards his $1.7 billion settlement over his role in the opioid crisis on Friday. The drugmaker is reportedly seeking to waive penalties for default and has been considering filing for a second bankruptcy.
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DEA records later showed that 40% of all opioid pills sold in US pharmacies between 2006 and 2012 during the so-called second wave of the opioid crisis came from Mallinckrodt.

In 2020, Mallinckrodt filed for bankruptcy but exited Chapter 11 last year with a reorganization plan that included a $1.7 billion settlement of litigation related to the opioid crisis.

Mallinckrodt still owes $1.25 billion under the opioid plan, which included liability releases for the company and its executives, the Journal reported.

People familiar with the company told the outlet that a decision on Friday’s payment has yet to be made.

As of Thursday morning, a securities filing showed Mallinckrodt opted not to pay $56 million in interest payments owed to its secured bondholders, according to the Journal.

The documents said Mallinckrodt continues to talk to creditors about restructuring proposals that could be completed in or out of bankruptcy court.

Mallinckrodt still owes $1.25 billion under the opioid plan.
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Earlier this month, the Ireland-based drugmaker which has a US hub in St. Louis received a letter from the trust demanding prompt payment and threatening action in the event of default, Reuters reported.

The company that makes powerful painkillers and branded drugs like Acthar Gel for the treatment of multiple sclerosis was also considering filing for bankruptcy.

A Mallinckrodt representative did not immediately respond to The Posts request for comment.

Don Barrett, an attorney representing 950 hospitals in the settlement, told Bloomberg that a failure to pay payments for the billion-dollar settlement is siphoning money from hospitals, siphoning money from victims.

However, victims are far behind in the pecking order for repayment, with the company’s creditors at the top of the food chain.

Those lenders are also the ones who argue that Mallinckrodt can’t afford to make its multimillion-dollar second installment and should go bankrupt in hopes of getting a better deal.

The Ireland-based pharmaceutical company, which has a US hub in St. Louis, produces morphine, codeine and branded drugs such as Acthar Gel for the treatment of multiple sclerosis.
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I don’t know if parents have the energy to start all over, Kay Scarpone, whose son Joseph died of an overdose in 2015 after using Mallinckrodt-brand opioids, told Bloomberg.

At this rate, she said, she is uncertain whether the victims’ families will be compensated despite having already endured a painful process of gathering death certificates, coroner’s reports, old drug prescriptions, rehabilitation information and other documentation to prove that their loved ones have used Mallinckrodts products, the outlet reported.

Were they the ones that were hurt, yet are they going to pay off their hedge funds and loans and that’s where the money is going to go? It’s very disheartening for all of us to sit down and see how our justice system works, Scarpone said.

Mallinckrodt has taken a settlement approach in bankruptcy court similar to what Purdue Pharma and other opioid makers have done after three waves of opioid crises.

In total, the deals exceeded $50 billion. McKesson, which distributes a third of all pharmaceuticals used in the United States, was slapped with the most expensive deal, at $7.9 billion.

Mallinckrodt, meanwhile, finished at No. 11 behind Purdue Pharma, Johnson & Johnson, Walgreens, CVS and Walmart, according to data from Bloomberg.

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