Mallinckrodt

Julie Lewis | The Daily Star

Mallinckrodt in Hobart is shown in July 2017.

Gov. Andrew Cuomo announced last week that New York state officially filed charges against Mallinckrodt Pharmaceuticals, which operates a manufacturing and distribution facility in northeastern Delaware County, for its alleged role in creating and perpetuating the opioid epidemic.

On April 16, the New York state Department of Financial Services, as the state’s sole insurance regulator, filed administrative proceedings against Mallinckrodt and its subsidiaries, alleging that the company “fraudulently misrepresented the safety and efficacy of its opioid drugs, leading to medically unnecessary prescriptions, addiction and abuse, and a dramatic increase in insurance costs for New York consumers.”

“The worst frauds are those that go beyond individual harm to institutionalized systemic fraud — and the opioid scheme is no exception," Cuomo said. “The opioid manufacturers knew how addictive and dangerous their products were and they used it as a business model for their own financial gain at the cost of thousands of human lives and billions of dollars. The damage they have caused by creating and perpetuating the opioid epidemic that is devastating our state and nation has been immeasurable, and we are taking action to ensure these big pharmaceutical companies are held responsible for their fraudulent practices.”

The charges are the first to be filed in an ongoing investigation initiated by DFS in 2019 to seek restitution for New Yorkers who overpaid an estimated $2 billion in insurance premiums throughout the last decade, an overpayment associated with with opioid manufacturers “misrepresenting the safety and efficacy” of their products, according to a media release.

Mallinckrodt is a U.K.-based company that moved its headquarters to Ireland in 2013 to avoid British taxes.

According to the department’s statement of charges, Mallinckrodt was the “most prolific” manufacturer of opioid pills in the New York market, producing approximately 39% of the opioid pills that flooded New York from 2006 to 2014. From 2009 to 2019, Mallinckrodt supplied more than one billion opioid pills to the approximately five million New Yorkers who hold commercial health insurance policies.

In its Hobart facility, Mallinckrodt manufactures its own name-brand opioids, Exalgo (hydromorphone hydrochloride) and Roxicodone (oxycodone hydrochloride), as well as numerous generic formulations, including versions of OxyContin, Percocet and Vicodin, according to the charges.

The charges allege that Mallinckrodt “misrepresented the safety and efficacy of both its branded and unbranded opioid products in an effort to convince healthcare professionals and patients, falsely, that the benefits of using opioids to treat chronic pain outweighed the risks and that opioids could be safely used by chronic pain patients,” and “repeatedly overstated the benefits of long-term opioid treatment and failed to disclose the lack of evidence supporting such use.”

DFS also alleges that Mallinckrodt “downplayed the risks of negative outcomes for patients, including the risk of addiction and abuse and the difficulty of withdrawal; and falsely masked the signs of addiction by calling them ‘pseudo-addiction,’” and “knew the false narrative and misrepresentations would result in claims for payment of medically unnecessary opioid prescriptions to commercial insurance companies.”

“The consequences of this explosion of opioids on the market were as predictable as they were tragic,” the charges read. “In every community, in every walk of life, Americans became addicted to these powerful drugs. When they could no longer obtain ‘legitimate’ prescriptions from their doctors, they often turned to illicit sources, including ‘pill mills’ where unscrupulous healthcare providers would hand out opioid prescriptions, for cash, on demand. When the opioid medications themselves became too expensive or too difficult to obtain, many victims turned to street-level drugs to feed their habit, including heroin and fentanyl-laced narcotics.”

The misrepresentations were allegedly made through a variety of materials and means, including product labeling and marketing, online educational materials directed towards both prescribers and patients, and in scholarly materials and textbooks used for training prescribing physicians, according to the charges.

Misrepresentations were also allegedly made in materials published by front groups, including pain-topics.org, which the charges described as “seemingly independent third-parties that were in effect controlled by Mallinckrodt and others in the opioid industry.”

The state alleged that Mallinckrodt knew that the statements it was presenting as proven scientific facts were “fraudulent with no scientific basis.”

“These allegations are without merit and it is unfortunate that the New York State Department of Financial Services’ action relies on misperceptions about Mallinckrodt, especially in light of the NY Attorney General endorsing the recently announced global opioid settlement in principle with the Company,” a Mallinckrodt spokesperson said in an April 30 email to The Daily Star. “In its Hobart, NY facility, Mallinckrodt has and continues to manufacture necessary, legitimate opioid medications in amounts that are approved by the U.S. Drug Enforcement Administration, and does not promote these products to doctors.”

DFS alleged that each fraudulent prescription sold constitutes a separate violation under both New York Insurance Law and New York Financial Services Law, which respectively prohibit fraudulent insurance acts and intentional fraud or intentional misrepresentation of a material fact with respect to a financial product or service, including health insurance.

Violations of each law carry penalties of up to $5,000 plus the amount of the fraudulent claim for each violation or $5,000 per violation.

The hearing is scheduled to begin Aug. 24 and will be held at the office of the New York State Department of Financial Services in New York City. 

Sarah Eames, staff writer, can be reached at seames@thedailystar.com or 607-441-7213. Follow her @DS_SarahE on Twitter.

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