Mallinckrodt Reaches $1.6 Billion Deal to Settle Opioid Lawsuits

Mallinckrodt Pharmaceuticals, the largest generic opioid manufacturer in the United States, has tentatively agreed to pay $1.6 billion to settle thousands of lawsuits brought by state and local governments over its role in the opioid crisis.

The agreement was endorsed by 47 states and U.S. territories along with a committee of lawyers representing thousands of cities and counties, the company said on Tuesday.

The money, to be paid into a cash trust over eight years, will be used to underwrite the costs of opioid addiction treatments and related efforts across the country.

“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,” Attorney General Xavier Becerra of California said in a statement announcing the agreement. “Our office has worked aggressively to hold accountable bad actors who fueled this public health crisis.”

Under the terms of the agreement, the United States division of Mallinckrodt that produces generic opioids would file for Chapter 11 bankruptcy. After a bankruptcy judge approves the restructuring plan, an initial payment of $300 million would be disbursed to plaintiffs to alleviate the opioid crisis, with the remaining $1.3 billion to be paid out over eight years.

Other divisions of the company, which has its headquarters abroad and also produces branded drugs, are not filing for bankruptcy.

Mallinckrodt is the first opioid company to reach even a tentative national settlement agreement with municipal governments and most of the states. Offers from other defendants — like Purdue Pharma, the maker of OxyContin, which, like Mallinckrodt, is now also seeking to restructure in bankruptcy court, and from the health and consumer products giant Johnson & Johnson and huge drug distributors like McKesson — have yet to be accepted by an overwhelming majority of plaintiffs.

The Centers for Disease Control and Prevention said that from 1999 to 2017, almost 218,000 people died in the United States from overdoses related to prescription opioids. The opioid-related deaths were five times higher in 2017 than they were in 1999, according to the C.D.C.

In a statement, Paul T. Farrell Jr., Paul J. Hanly Jr. and Joe Rice, lawyers who are negotiators on behalf of thousands of cities and counties suing the company in federal courts, said that though they had agreed to the deal in principle, they were still working out the details.

“Our pursuit of corporate accountability against a host of other defendants across the entire drug supply chain will not stop,” the lawyers said.

New York is one of the few states that have not yet confirmed acceptance of the Mallinckrodt offer. Its trial, which is being joined by Suffolk and Nassau Counties, against a cluster of pharmaceutical industry defendants, including Mallinckrodt, is set to begin on March 20.

In a statement, Letitia James, the New York attorney general, said: “While we continue to work with other states and creditors to ensure that any proposal involving Mallinckrodt serves the interests of our communities and that money can flow to our communities for remediation as quickly as possible, we have yet to reach a final agreement with the company on all terms of a New York settlement. Unless that happens, we are determined to press ahead with the trial against the company next month.”

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