Generics maker Mallinckrodt says the company’s board may miss a $200 million opioid payout expected later this week.
In a June 5 filing with the Securities and Exchange Commission, the financially troubled company said it faced mounting domestic and creditor demands over the payment, which is part of a $1.7 billion opioid deal struck under a bankruptcy settlement last year.
One possibility is that the company could file for a second bankruptcy, a move that could jeopardize the entire deal.
“It could be devastating,” said Joseph Steinfeld, an attorney who represents people harmed by Mallinckrodt’s painkillers. “It could potentially wipe out the entire settlement.”
According to Steinfeld, the individual victims collectively stand to lose about $170 million in total compensation. The rest of the money was to go to state and local governments to help fund drug treatment and health care programs.
The opioid crisis has killed hundreds of thousands of Americans, first triggered by pain medication, then fueled by street drugs like fentanyl and heroin.
If Mallinckrodt files for a second bankruptcy, payments would likely go to the company’s executives, staff and other creditors first, with opioid claims paid last.
“Paying board members, paying company professionals, and paying non-victims is totally fine,” Steinfeld said. “But it ignores the fact that most harmed people and the reason the company went bankrupt is because of the harm they’ve done” through opioid sales.
Katherine Scarpone was about to receive compensation after the death of her son Joe, a former Marine who suffered a fatal opioid overdose eight years ago.
He described this latest legal and financial setback as “daunting”.
“First there’s the victim, right, who might lose their life and then there’s the bankruptcy and going through all the painful filing stuff and then blowing up all that that really pisses me off,” Scarpone told NPR.
Mallinckrodt is headquartered in Ireland with US corporate offices in Missouri and New Jersey.
A company spokesperson contacted by NPR declined to comment on the matter beyond the SEC filing.
“On June 2, 2023, the board directed the company’s management and consultants to continue analyzing various proposals,” the company said in its statement.
“There can be no assurances as to the outcome of this process, including whether or not the company will be able to file a filing shortly or subsequently under the United States Bankruptcy Code or similar foreign bankruptcy or insolvency laws.”
Mallinckrodt’s move comes as drugmakers, wholesalers and drug chains caught up in the prescription opioid crisis have agreed to pay more than $50 billion in settlements.
Most of the companies involved in these deals are much larger and more financially stable than Mallinckrodt.
In late May, a federal appeals court approved another opioid-related bankruptcy settlement worth more than $6 billion involving Purdue Pharma, the maker of Oxycontin.
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