Mallinckrodt sued, underpaid hundreds of millions in Medicaid rebates, US says

The U.S. Justice Department is suing Mallinckrodt, alleging the drugmaker knowingly underpaid Medicaid hundreds of millions of dollars. 

Drugmakers are required to pay state Medicaid programs quarterly rebates in exchange for Medicaid's coverage of their drugs. The rebates include an inflationary component, which is designed to insulate Medicaid from drug price increases that outpace the rate of inflation. 

Drugmakers must pay rebates based on the drug's price since 1990 or whenever it was first marketed, whichever date is later. 

Mallinckrodt, which acquired Questcor Pharmaceuticals in 2013, allegedly underpaid rebates due on its drug, Acthar. 

Acthar was first marketed long before 1990, but Questcor and later Mallinckrodt calculated rebate payments as if it was first marketed in 2013, the Justice Department claims. 

Before it was acquired by Mallinckrodt, Questcore raised the price of Acthar by more than $20,000 per unit. 

The government claims that Mallinckrodt avoided paying inflationary rebates on Acthar and therefore knowingly underpaid Medicaid by hundreds of millions of dollars.

The Justice Department said that CMS warned Mallinckrodt several times that it could not ignore the price increases on Acthar when paying rebates. 

Read the full news release here

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