Pledge on Drug Pricing & Innovation

Mallinckrodt’s Pledge to America: Create the best possible healthcare at the lowest possible cost for the greatest number of people.

We understand and empathize with concern over the cost of drugs, particularly as patient out-of-pocket costs grow with increasingly higher deductibles in health insurance plans. Moreover, recent ‘outlier’ examples of a few companies taking dramatic percentage price increases, particularly on life-saving medicines, have called into question the overall commitment of the pharmaceutical industry to patients, families and the broader healthcare system.

At Mallinckrodt, we believe that pricing for an innovative (or branded1) drug or therapy should reflect its value to patients, providers, and the healthcare system as a whole. Irresponsible price increases are wrong and are counter to what we stand for as a company, and we do not believe that the handful of examples highlighted by Congress and the media reflect how we and others in the legitimate, innovative pharmaceutical industry operate.

It is Mallinckrodt’s purpose and strategy to address unmet medical needs of often small, under-served patient populations – individuals suffering from complex, devastating and, in some cases, life-threatening or life-altering diseases and conditions – by identifying, developing, and marketing medicines and therapies that can make a difference in their lives. Our goal is to reach more of the patients who can best benefit from these effective medicines and, in doing so, grow our business by serving more patients rather than relying on substantial price increases.

We seek to be a trusted partner with policymakers, healthcare providers, payers, and patient groups to reform America’s healthcare system in a manner that is sustainable and patient-centric. In that context, this document outlines our philosophy on responsible pricing for innovative drugs and treatments.

Our Commitment

We believe there are three core principles to responsible pricing, and we pledge to stand by them as part of our social contract with patients, providers and other stakeholders in the American healthcare system.

  1. We Will Price our Innovative Products Responsibly while Ensuring Patient Access

    We will price our innovative products responsibly, and in a way that reflects the value they offer patients, providers and the U.S. healthcare system as a whole. That value will be determined by measurable information, including clinical data, health economic and outcomes research (including the impact on America’s healthcare system as a whole), patient and physician experience, and fairly negotiated, arms-length contracts with distributors, payers and integrated delivery networks.

    If we do increase the list price on any of our innovative drugs or therapies, we will do so no more than once per calendar year, and no price increase will exceed a single-digit percentage. We will not engage in predatory pricing, and if we do change the price of an innovative product, we will work with payers and other stakeholders to ensure that every patient properly identified as needing one of our innovative therapies does not go without treatment because of an inability to pay. We will also engage with patient groups and other key parties to understand and help address systemic or policy challenges that make it difficult for patients to access our innovative products.

  2. We Will Continue to Invest in Innovation that is Valuable to Patients, Physicians, and the U.S. Healthcare System

    We will apply our unique skills and expertise to develop and bring to market safe, effective, and life-saving or improving therapies for patients and ensure that those who can benefit most have access to those treatments. We will do that while contributing value to the overall U.S. healthcare system, providing our employees with rewarding work and career development, and appropriately managing the risk to our shareholders.

    As part of our commitment to this continued investment in innovation, we expect to increase our R&D spending in absolute dollars at least 50% by 2021, and we expect to more than double our R&D spending in absolute dollars over the next decade, with the vast majority of our spending taking place in the United States.

    We will make significant investments to:

    • develop clinical and health economic data to further demonstrate our medicines’ value for particular patient populations and reduce overall healthcare costs;
    • provide physicians with that data to improve treatment options and to payers to increase patient coverage;
    • seek regulatory approvals in key therapeutic areas and expand patient access; and
    • continue to build our Science and Technology capabilities to develop new medicines and treatments for devastating diseases and conditions.

    Importantly, we will do all of this in a manner that seeks to provide our shareholders with a reasonable return for the risk they take by allowing us to make these investments.

  3. We Will Support Patient Education and Disease Awareness Programs

    We will continue to support patient education and awareness programs by working with patient groups and advocacy organizations, managing our work with them transparently and ethically. We will seek to be a trusted partner, and we pledge never to use our relationships with patient groups or advocacy organizations to inappropriately market or promote the innovative products we manufacture or sell.

That is our pledge to America on drug pricing and innovation.

1 Our pricing pledge applies to currently promoted brands, which consists of H.P. Acthar® Gel (repository corticotropin injection); INOMAX® (nitric oxide) gas, for inhalation; OFIRMEV® (acetaminophen) injection, Therakos® immunology platform; and the hemostasis product portfolio of PREVELEAK® surgical sealant, RAPLIXA® (fibrin sealant (human)) for topical use, and RECOTHROM® thrombin topical (recombinant)

Cautionary Statements Related to Forward-Looking Statements

Statements in this document that are not strictly historical, including statements regarding future financial condition and operating results, economic, business, competitive and/or regulatory factors affecting Mallinckrodt's businesses 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: 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.