Drug manufacturer Mallinckrodt Pharmaceuticals has announced its plans to file for bankruptcy as part of a settlement to pay $1 billion less to a trust in connection with the opioid crisis. Mallinckrodt, one of the largest makers of opioid pain pills in the United States, emerged from its first Chapter 11 bankruptcy last year after agreeing to pay $1.7 billion to aid in tackling the addiction and overdose crisis.
The company had already made an initial payment of $450 million, but it was unable to make its second $200 million payment due in June. Mallinckrodt and its creditors have agreed that the company would enter bankruptcy under a restructuring agreement, which calls for the elimination of most of the opioid settlement payments, except for a final payment of $250 million. Mallinckrodt officials have indicated that they have the trust’s agreement to renegotiate the settlement.
Individual victims who were set to receive around $160 million under the original settlement will now only receive between $50 million and $60 million if the bankruptcy plan is approved. Victims include those who lost loved ones to overdoses or experienced life-altering consequences, such as lost jobs, lost custody of children, and medical expenses. Attorney Joseph Steinfeld, representing about 20,000 personal injury clients with claims against Mallinckrodt, expressed disappointment and said they feel “sold down the river” by the company.
Mallinckrodt has stated that it is operating normally and expects to emerge from its second bankruptcy by the end of the year. However, the company has faced financial struggles since its initial bankruptcy filing in 2020. It has not made a quarterly profit since fall 2020 and has accumulated losses of $2.6 billion, which have increased in recent months.
The impending bankruptcy represents a significant change in the company’s previously positive message to investors. Mallinckrodt had reported beating its own expectations and awarded its new CEO a cash bonus for performance. However, the company’s financial performance has since deteriorated, with nearly $1 billion in losses incurred in the first half of this year alone.
Mallinckrodt played a crucial role in flooding the United States with legal pain pills during the height of the opioid crisis. Between 2006 and 2014, the company accounted for 27 percent of the opioid market, surpassing Purdue Pharma’s share. The Drug Enforcement Administration revealed that Mallinckrodt’s 30-milligram blue oxycodone tablet became the preferred drug on the street as the crisis escalated. Internal documents also indicated the company’s aggressive marketing tactics towards doctors.
Mallinckrodt’s bankruptcy filing and the reduction in the settlement payment have significant implications for the ongoing efforts to address the opioid crisis and provide compensation for victims affected by the company’s actions. The outcome of the bankruptcy proceedings will likely impact the final amount victims receive and the broader discussions surrounding responsibility and accountability in the pharmaceutical industry.