Under pressure from thousands of plaintiffs in regards to its role in the opioid crisis, Mallinckrodt — the largest generic opioid manufacturer in the United States — has agreed to pay out $1.6 billion to a trust over eight years.
There remains the potential for increased payment to that trust under the terms of the agreement, but all of these funds would be used for covering the costs of opioid addiction treatment and related efforts. A group of 47 state and U.S. territory attorneys general supported the agreement. It will be facilitated through a Chapter 11 bankruptcy filing for certain subsidiaries of the company, from which Mallinckrodt plc and its specialty brands will be excluded.
According to the Centers for Disease Control and Prevention, opioids were contributing factors to more than 47,600 overdose deaths in 2017 alone. Between 1999 and 2017, drug overdoses led to the deaths of more than 702,000 people in the United States.
“Nothing can undo the devastating loss and grief inflicted by the opioid epidemic upon victims and their families, but this settlement with Mallinckrodt is an important step in the process of healing our communities,” California Attorney General Xavier Becerra said. “Our office has worked aggressively with our coalition partners to hold accountable bad actors who fueled this public health crisis. While today’s settlement is a step in the right direction, we’ll continue to work to bring more much-needed relief to families throughout California whose lives have been upended by the opioid crisis.”
Specifically, the terms of the agreement will see $300 received upon Specialty Generics’ emergence from a completed Chapter 11 case, $200 million upon the first and second anniversaries of its emergence, and another $150 million provided on each of the third through eighth anniversaries. These will be dispersed through the trust. Additionally, Specialty Generics will be bound by some agreed-upon operating rules and, upon emergence from its bankruptcy process, receive warrants exercisable at $3.15 per share to purchase shares that would represent around 19.99 percent of its fully diluted outstanding shares.
The agreement was reached with a court-appointed plaintiffs’ executive committee.
Despite the major settlement, Mallinckrodt, on behalf of it and all of its subsidiaries, stated that everything is moving forward with business as usual.
“Reaching this agreement in principle for a global opioid resolution and the associated debt refinancing activities announced today are important steps toward resolving the uncertainties in our business related to the opioid litigation,” Mark Trudeau, president and CEO of Mallinckrodt, said. “Importantly, when finalized, we believe the proposed settlement and capital restructuring activities will provide us with a clear path forward to achieving our long term strategy, preserving value for our financial stakeholders and providing us with the flexibility to operate effectively.”
Presently, Mallinckrodt predicts that Specialty Generics will continue to be its indirect, wholly owned subsidiary both during and following emergence from the court-supervised process. Beyond the monetary losses involved in that process, Mallinckrodt will be subject to a marketing prohibition for its opioid products and be required to ensure systems are available to prevent drugs from going to the wrong hands.