Mallinckrodt Considering Chapter 11 Bankruptcy Because of Opioid Settlement
Mallinckrodt, which is considered one of the biggest generic opioid manufacturers in the US, has tentatively agreed to settle the numerous federal lawsuits against them. This company was sued by the local and state government because of the opioid crisis, and they have tentatively agreed to pay $1.6 billion to settle it. The company stated on Tuesday that the agreement was endorsed by over 40 US territories and states with a large committee of lawyers representing different countries and towns.
Why the company was sued
According to reports from the National Survey on Drug Use and Health, over 10 million Americans from the age of 12 and above misused opioids in 2018 – this includes prescription pill abusers and heroin users. According to the Centers for Disease Control and Prevention, opioid-related deaths increased in 2017 – they reported over 70,000 people died from a drug overdose. These deaths are five times higher than the numbers reported in 1999.
How chapter 11 bankruptcy will release Mallinckrodt of all opioid-related claims
According to the agreement, Mallinckrodt will pay the money into a cash trust for over eight years. The money will be used to guarantee opioid addiction treatment costs as well as the associated efforts across the country. The United States Mallinckrodt Generics division will file for Chapter 11 bankruptcy under the agreement terms.
Once the restructuring plan is approved by the bankruptcy judge, the company will have to disburse an initial $300 million payment to the plaintiffs to alleviate the opioid crisis – then the remaining $1.3 billion will be paid over eight years. This Chapter 11 bankruptcy move will liberate this large generic opioids manufacturer from all opioid-related claims. However, other divisions of Mallinckrodt Company with headquarters abroad are not filing for bankruptcy.
Mallinckrodt is the first opioid company to reach a tentative settlement
Although Mallinckrodt’s agreement still needs to be finalized and accepted by the different municipalities suing the company, it is still the first generic opioid manufacturer to reach such an agreement. Other companies like Purdue Pharma, who are the manufacturers of OxyContin, have yet to reach a settlement. Three of the largest distributors of opioids have also had their settlement deals rejected by over 20 Attorneys General.
The settlement agreement hasn’t been worked out completely
Some of the lawyers negotiating on behalf of the different countries and cities suing the company stated that even though the settlement deal has been agreed to in principle, there are still a number of details that need to be worked out. One of the few states in the US that have not confirmed accepting the offer from Mallinckrodt is New York. However, the state of New York’s trial against different pharmaceutical companies – one of which is Mallinckrodt will begin on March 20th. Also, Cleveland and West Virginia case trials are slated to happen later in the year.
Two counties in Ohio, Summit, and Cuyahoga reached a settlement of $260 million with Mallinckrodt and three other opioid distributors – thus, avoiding going on trial.
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