(Reuters) – Mallinckrodt Plc filed for bankruptcy last year to resolve thousands of lawsuits accusing it of fueling the opioid epidemic, but as it aims to end the process, it must first deal with a completely different type of claim.
The drug company recently launched a multi-day hearing seeking approval for its proposed reorganization plan and the settlement of the underlying opioid litigation, which creditors and government entities have broadly endorsed.
But now, in what a lawyer for Mallinckrodt has called an “unconventional” approach to a Chapter 11 plan confirmation process, the company will begin another hearing on Monday into claims by two insurers that they had to. reimburse their customers at heavily inflated prices for Mallinckrodt products. Acthar Freeze.
The product, one of the company’s main money generators, is used for the treatment of infantile spasms and multiple sclerosis.
The insurers, Humana Inc and Attestor, allege that Mallinckrodt not only engaged in anti-competitive practices by inflating the prices of Acthar before the bankruptcy in violation of antitrust laws, but that he continued to charge these high rates during the ‘case. The insurers argue that, since they had to continue paying amounts they deemed illegal, they should be entitled to priority status in Mallinckrodt’s creditors payment structure.
A spokesperson for Mallinckrodt did not immediately respond to a request for comment. The company said in court documents that the insurers’ claims were unfounded.
Lawyers have said they need to resolve the case before U.S. bankruptcy judge John Dorsey, who is overseeing the Chapter 11 case, can rule on the plan. It aims to reduce Mallinckrodt’s overall debt by $ 1.3 billion and create a trust for plaintiffs who have filed opioid-related claims against the company worth approximately $ 1.7 billion.
The Acthar-related claims, which Mallinckrodt estimates at around $ 1.4 billion, are online for a total recovery of $ 7.5 million. Insurers say the actual claims are “billions” higher than Mallinckrodt’s estimate.
Mallinckrodt says that insurers’ claims for damages are not considered “actual administrative expenses” which are usually paid first in a business failure.
Other individuals and entities that have filed Acthar-related antitrust complaints have also opposed the proposed plan. They argue that this provides inappropriate rewards for management and unduly favors opioid seekers over their demands.
Mallinckrodt has settled Acthar’s antitrust claims filed by federal and state governments.
The case is In re Mallinckrodt Plc, United States Bankruptcy Court, District of Delaware, No. 20-12522.
For Mallinckrodt: George Davis, Robert Malionek, Chris Harris, George Klidonas, Andrew Sorkin, Anupama Yerramalli, Jeff Bjork, Elizabeth Marks of Latham & Watkins; and Mark Collins, Robert Stearn Jr, Michael Merchant, Amanda Steele, Robert Maddox of Richards, Layton & Finger
For insurers: Matthew Feldman and Paul Shalhoub of Willkie Farr & Gallagher; Donna Culver and Robert Dehney of Morris, Nichols, Arsht & Tunnell; and Scott Solberg and Benjamin Waldin of Eimer Stahl
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