Mallinckrodt Cleared to Settle Opioid Suits, Restructure (1)

Pharmaceutical company Mallinckrodt Plc won court approval of its bankruptcy exit plan, clearing the way for a settlement of thousands of lawsuits related to its opioid drugs.

U.S. Bankruptcy Judge John Dorsey said in a written opinion Thursday that he would approve the plan, which calls for handing control of the company to creditors and routing opioid litigation claims to a trust set aside for their settlement and payment. A trial over the plan began in November and ended last month.

In late 2020, Mallinckrodt became the third major opioid maker to file for bankruptcy after being swamped by claims that it profited by fueling the U.S. opioid epidemic. At the time, the drugmaker had already spent $100 million fighting the lawsuits.

Mallinckrodt will pay $1.75 billion to settle the opioid suits, $125 million more than it proposed when the bankruptcy began. Creditors overwhelmingly supported the deal. In his ruling, Dorsey said the accord is reasonable and fair, especially considering the alternatives -- years of litigation and, perhaps, a piecemeal sale of the company.

“The nature of the claims at issue here -- personal injury claims arising out of the use of opioid medications -- makes time of the essence,” Dorsey wrote in his roughly 100-page opinion. “While the parties here could spend decades litigating who is right and who is liable for what, the need for funds to manage and abate this crisis is real and immediate.”

Before it filed for bankruptcy, Mallinckrodt was named in more than 3,000 opioid-related lawsuits alleging potentially trillions of dollars in damages, court papers show. During the trial over its settlement, Chief Transformation Officer Stephen Welch said it was unlikely Mallinckrodt could win every one of the cases, and even losing a handful would quickly harm the company.

The company also faced an arduous fight in bankruptcy over its Acthar Gel drug. Some insurers claimed the company violated antitrust law in its handling of the medication, used for treating infantile spasms and other conditions. Acthar once sold for $40 a vial and more recently sold for $40,000. Mallinckrodt prevailed in a battle over some of those claims in December.

Mallinckrodt has said it will file an examinership proceeding in Ireland to complete its reorganization, which may take approximately 100 days.

The case is Mallinckrodt Plc, 20-12522, U.S. Bankruptcy Court for the District of Delaware (Wilmington). To view the docket on Bloomberg Law, click here.

(Adds details from ruling beginning in paragraph four.)

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Jeremy Hill in New York at jhill273@bloomberg.net

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Claire Boston at cboston6@bloomberg.net

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