Mallinckrodt Statement on DEA and USAOs Agreement in Principle
April 3, 2017
- Company reaches agreement in principle with DEA and USAOs to resolve previously disclosed investigations into company monitoring programs for controlled substances
- Mallinckrodt Agrees to Pay $35 Million to Settle Past Claims
- Resolution Will Not Have a Material Adverse Effect on Mallinckrodt's Financial Condition, Results of Operations or Cash Flows
Mallinckrodt plc has reached an agreement in principle with the U.S. Drug Enforcement Administration (DEA) and the U.S. Attorneys' Offices (USAOs) for the Eastern District of Michigan and the Northern District of New York, respectively, to settle previously disclosed investigations relating to the company's monitoring program, reporting, record keeping and security measures related to manufacturing and distribution of controlled substances. As part of the agreement, the company will pay $35 million to resolve all potential claims. The agreement in principle is subject to additional review and approval by the Department of Justice and DEA.
Mallinckrodt has been and is a leader in developing and sharing best practices related to its innovative suspicious order monitoring program that exceeds DEA requirements. The company denies government allegations that it violated applicable laws in connection with its suspicious order monitoring program, and the settlement contains no admission of liability for civil penalties for relevant conduct. In discussions with the government, the company has responded to unfounded claims and successfully refuted factual inaccuracies -- reaching an agreement in principle that is agreeable to the government in light of the facts of the matter.
As previously disclosed in the company's public filings, Mallinckrodt believes that, given the information currently available, and after taking into account amounts already accrued, the ultimate resolution will not have a material adverse effect on its financial condition, results of operations or cash flows. Mallinckrodt will comment further on the resolution at the appropriate time.
In addition to its industry-leading suspicious order monitoring program, Mallinckrodt has invested millions of dollars in a comprehensive program to address opioid abuse and misuse, and is proud of the programs and initiatives it has developed. The company is and remains fully committed to working with policy makers, community leaders, law enforcement and industry partners to ensure the responsible use of pain medication and prevent unused medications from ending up in the wrong hands. Mallinckrodt's multi-pronged approach includes:
- The purchase and donation of more than 1.5 million drug deactivation pouches* to help combat one of the top public health threats in the U.S. today – abuse of prescription pain medications. Through this initiative, families can actively address concerns with the responsible use of pain medications and patient safety;
- Improving integration of federal and state prescription drug monitoring programs (PDMPs) and efforts; and strong advocacy from Mallinckrodt in support of a PDMP in Missouri, the lone U.S. state still without such a program;
- Enhancing addiction rehabilitation and drug take-back programs, including provision of drop boxes to local law enforcement in communities where major company sites reside;
- Collaborating with law enforcement to help prevent misuse and diversion, including:
- Providing no-cost placebo tablets of Mallinckrodt opioids to officers and prosecutors for use in law enforcement operations;
- Attacking drug theft through tracking devices in selected Mallinckrodt drug bottles;
- Contributing testimony on behalf of prosecution in drug diversion cases;
- Improving stakeholder education for patients, providers and the public at large, including education initiatives validated by measurable outcomes; and
- Partnering with stakeholders and strategically aligned third party organizations, in part through founding the Anti-Diversion Industry Working Group, a collective of leading manufacturers and distributors of pharmaceutical controlled substances coming together to collaborate and share best practices with the purpose of exceeding DEA obligations for opioid anti-diversion programs.
*Manufactured by Minneapolis-based Verde Technologies.
Mallinckrodt is a global business that develops, manufactures, markets and distributes specialty pharmaceutical products and therapies. Areas of focus include autoimmune and rare diseases in specialty areas like neurology, rheumatology, nephrology, pulmonology and ophthalmology; immunotherapy and neonatal respiratory critical care therapies; and analgesics and hemostasis products. The company's core strengths include the acquisition and management of highly regulated raw materials and specialized chemistry, formulation and manufacturing capabilities. The company's Specialty Brands segment includes branded medicines and its Specialty Generics segment includes specialty generic drugs, active pharmaceutical ingredients and external manufacturing. To learn more about Mallinckrodt, visit www.mallinckrodt.com.
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Cautionary Statements Related to Forward-Looking Statements
Statements in this document that are not strictly historical, including statements regarding the terms of the agreement in principle and the expected payment, future operating results, and any other statements regarding events or developments that we believe or anticipate will or may occur in the future, may be "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, and involve a number of risks and uncertainties.
There are a number of important factors that could cause actual events to differ materially from those suggested or indicated by such forward-looking statements and you should not place undue reliance on any such forward-looking statements. These factors include risks and uncertainties related to, among other things: the required review and approval of the terms of the agreement in principle by relevant government agencies; Mallinckrodt's ability to negotiate definitive documentation for the settlement; general economic conditions and conditions affecting the industries in which Mallinckrodt operates; the commercial success of Mallinckrodt's products; Mallinckrodt's ability to realize anticipated growth, synergies and cost savings from acquisitions; conditions that could necessitate an evaluation of Mallinckrodt's goodwill and/or intangible assets for possible impairment; changes in laws and regulations; Mallinckrodt's ability to successfully integrate acquisitions of operations, technology, products and businesses generally and to realize anticipated growth, synergies and cost savings; Mallinckrodt's ability to successfully develop or commercialize new products; Mallinckrodt's ability to protect intellectual property rights; Mallinckrodt's ability to receive procurement and production quotas granted by the U.S. Drug Enforcement Administration; customer concentration; Mallinckrodt's reliance on certain individual products that are material to its financial performance; cost containment efforts of customers, purchasing groups, third-party payers and governmental organizations; the reimbursement practices of a small number of public or private insurers; pricing pressure on certain of Mallinckrodt's products due to legal changes or changes in insurers' reimbursement practices resulting from recent increased public scrutiny of healthcare and pharmaceutical costs; limited clinical trial data for H.P. Acthar Gel; complex reporting and payment obligations under healthcare rebate programs; Mallinckrodt's ability to navigate price fluctuations; future changes to U.S. and foreign tax laws; Mallinckrodt's ability to achieve expected benefits from restructuring activities; complex manufacturing processes; competition; product liability losses and other litigation liability; ongoing governmental investigations; material health, safety and environmental liabilities; retention of key personnel; conducting business internationally; the effectiveness of information technology infrastructure; and cybersecurity and data leakage risks.
These and other factors are identified and described in more detail in the "Risk Factors" section of Mallinckrodt's Annual Report on Form 10-K for the fiscal year ended September 30, 2016 . The forward-looking statements made herein speak only as of the date hereof and Mallinckrodt does not assume any obligation to update or revise any forward-looking statement, whether as a result of new information, future events and developments or otherwise, except as required by law.
Coleman N. Lannum, CFA
Senior Vice President, Investor Strategy and IRO
Daniel J. Speciale, CPA
Director, Investor Relations