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Mallinckrodt Must Pay $234 MIllion to Resolve False Claims Act Lawsuit Brought by Former Employee

The federal government, in conjunction with individual states, the District of Columbia and Puerto Rico, recently settled a False Claims Act lawsuit against Mallinckrodt PLC, a pharmaceuticals company.

The lawsuit alleged Mallinckrodt regularly and knowingly underpaid Medicaid rebates for one of its products, Acthar. As a result of the action, the company must pay nearly $235 million plus interest in eight installments.

Case background

The False Claims Act case was brought by James Landolt, who had once served as Mallinckrodt’s Director of Internal Controls, Gross to Net Accounting and Government Reporting. In the course of his duties he learned the company was misreporting the base Average Manufacturer Prise (AMP) for Acthar when making its reports to the Medicaid Drug Rebate Program (MDRP). Doing so allowed the company to reduce the rebates it paid by hundreds of millions of dollars.

Because Acthar was a drug approved before 1990, its base AMP should have been reported using the price in 1990. However, beginning in 2013, the company started reporting to MDRP as if the drug had been approved in 2010, after significant price hikes.

As of 2001, the drug cost approximately $50 mer 5 ml vial, but after 2010 it was approximately $40,000.

Landolt resigned from the company in 2018 and followed a qui tam action under the False Claims Act the following year, alleging the company knowingly failed dto pay correct rebates in violation of the False Claims Act. He will receive a 20 percent share of the settlement for his assistance.

For more information about how to file a False Claims Act when you become aware of internal wrongdoing in your company, contact an experienced whistleblower lawyer at Kardell Law Group.

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