The 125-year-old pharma giant behind morphine and codeine reached a deal to extend the deadline for its $200 million payment to an opioid victims’ compensation trust.
Mallinckrodt — which began producing morphine, codeine and other powerful pain-reducing drugs in 1898 — reached a $1.7 billion settlement in June 2022 with state and local governments for its role in fueling the overdose epidemic.
It owed $200 million on June 16 as its second scheduled payment towards the 10-figure sum, but a securities filing recorded on the due date now gives the drugmaker an extension to June 23.
Mallinckrodt has already shelled out $450 million toward the total, which will be distributed to states, hospitals, tribes, individuals and others affected by the opioid crisis.
However, Mallinckrodt is in discussions with financial creditors to seek waivers from potential defaults should it not make the payment on time, sources familiar with the company’s financial planning told the Wall Street Journal.
The pharmaceuticals company has been struggling financially since it became entangled in a slew of opioid-related litigation in 2011 when the Drug Enforcement Administration (DEA) first investigated it for failing to report suspicious orders.
DEA records later showed that 40% of all opioid pills sold at 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 the opioid crisis-related litigation.
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 has yet to be made on Friday’s payment.
As of Thursday morning, a securities filing showed that Mallinckrodt decided not to pay $56 million in interest payments owed to its secured bondholders, according to the Journal.
The documents said Mallinckrodt continues to speak to creditors about restructuring proposals that could be completed in or out of bankruptcy court.
Earlier this month, the Ireland-based drugmaker — which has a US hub in St. Louis — was sent a letter by the trust demanding a timely payment and threatening action in the event of a default, Reuters reported.
The company — which produces powerful painkillers and branded drugs such as Acthar Gel to treat multiple sclerosis — was also considering filing for a second bankruptcy.
A representative for Mallinckrodt did not immediately respond to The Post’s request for comment.
Don Barrett, a lawyer representing 950 hospitals in the settlement, told Bloomberg that a default on payments toward the billion-dollar settlement “is taking money away from hospitals, it’s taking money away from victims.”
However, victims are far back in the pecking order for repayment, with the company’s lenders at the top of the food chain.
Those lenders are also the ones arguing that Mallinckrodt can’t afford to make its second multimillion-dollar installment and should default in hopes of scoring a better deal.
“I don’t know if parents have the energy to start all over again,” Kay Scarpone, whose son Joseph died of an overdose in 2015 after using Mallinckrodt-branded opioids, told Bloomberg.
At this rate, she said, she’s unsure if victims’ families will be compensated despite already enduring a painful process of collecting death certificates, coroner reports, old pharmacy prescriptions, rehab information, and other documentation to prove their loved ones used Mallinckrodt’s products, the outlet reported.
“We’re the ones that are hurt, yet they’re going to pay off their hedge funds and loans and that’s where the money is going to go? It’s very disheartening to all of us, to kind of sit back and see how our judicial system just works,” Scarpone said.
Mallinckrodt took a settlement approach in bankruptcy court similar to what Purdue Pharma and other opioid makers did after three waves of the opioid crisis.
In total, settlements surpassed $50 billion. McKesson — which distributes one-third of all pharmaceuticals used in the US — was slapped with the most costly deal, at $7.9 billion.
Mallinckrodt, meanwhile, came in at No. 11 behind Purdue Pharma, Johnson & Johnson, Walgreens, CVS, and Walmart, according to data by Bloomberg.
Credit: Source link
