Attorney General Bonta Announces $230 Million Settlement Against Global Pharmaceutical Company

OAKLAND - Attorney General Rob Bonta today along with 49 other states, Puerto Rico, and the District of Columbia announced a settlement resolving allegations of fraud against Mallinckrodt, a global pharmaceutical company. Today’s settlement resolves allegations that from January 2013 through June 2020, Mallinckrodt violated state and federal laws by knowingly underpaying Medicaid drug rebates for its drug H.P. Acthar Gel (Acthar). Under the national settlement, Mallinckrodt will pay approximately $233.7 million to the states and federal governments, with California receiving a gross share of almost $14.7 million. 

“Mallinckrodt pocketed millions of taxpayer dollars by providing false information and underpaying drug rebates owed to the Medi-Cal Program,” said Attorney General Bonta. “We will continue to step in when corporations compromise the health and well-being of Californians.”

The lawsuit is the result of a whistleblower complaint in which the California Department of Justice's Division of Medical Fraud and Elder Abuse (DMFEA) along with the federal government, twenty-five states, the District of Columbia, and Puerto Rico intervened in 2020. Today’s settlement resolves allegations that between 2013 and 2020, Mallinckrodt trimmed the actual amount the company owed the states under the Medicaid Drug Rebate Program by misreporting key pricing information to Medicaid and Medi-Cal for its drug Acthar. Under the Federal Medicaid Drug Rebate Program, manufacturers are required to pay quarterly rebates to state Medicaid programs for drugs the programs cover. Drug rebates are calculated based in part on the average price drug wholesalers paid the company for a drug each quarter. This price is known as the Average Manufacturer’s Price, or AMP. The greater the reported AMP, the greater the rebate the manufacturer owes. To reduce its owed drug rebates, Mallinckrodt allegedly misreported key date and AMP-based pricing information. This alleged fraud denied California and other states tens of millions of dollars in rebates that Mallinckrodt was legally obligated to pay for Medicaid beneficiaries with Acthar subscriptions. As part of today’s settlement, the whistleblowers will share in a portion of the recovery.

The settlement agreement is a result of the California Department of Justice’s Division of Medi-Cal Fraud and Elder Abuse working with a team of other states. The California Department of Justice’s DMFEA protects Californians by investigating and prosecuting those who defraud the Medi-Cal program as well as those who commit elder abuse. These settlements are made possible only through the coordination and collaboration of governmental agencies, as well as the critical help from whistleblowers who report incidences of abuse or Medi-Cal fraud at  oag.ca.gov/dmfea/reporting.

DMFEA receives 75% of its funding from the U.S. Department of Health and Human Services under a grant award totaling $50,522,020 for federal fiscal year 2021-2022. The remaining 25% is funded by the State of California. The federal fiscal year is defined as October 1, 2021, through September 30, 2022.