By Jonathan Stempel
NEW YORK (Reuters) – New York state brought civil charges on Tuesday accusing Mallinckrodt Plc of insurance fraud for misrepresenting the safety and efficacy of its opioid drugs, leading to medically unnecessary prescriptions.
Governor Andrew Cuomo said the charges brought by New York’s Department of Financial Services are the first against a major opioid manufacturer in the regulator’s probe into entities that contributed to the nationwide opioid crisis.
New York accused Mallinckrodt of overstating the benefits of long-term opioid treatment, downplaying the risks of addiction and abuse, and knowing its conduct would result in the payment of fraudulent insurance claims on unnecessary prescriptions.
Mallinckrodt is the largest maker of generic opioids in the United States. According to New York, it supplied more than 1 billion pills to about 5 million policyholders in the state from 2009 to 2019.
The company was charged with violating two New York insurance laws, with civil penalties of up to $5,000 per violation.
Tuesday’s charges follow Mallinckrodt’s Feb. 25 agreement to pay $1.6 billion to settle thousands of lawsuits by state and local governments over its role in the U.S. opioid epidemic.
As part of that agreement, Mallinckrodt agreed to put a U.S. generic drug business into Chapter 11 bankruptcy.
Mallinckrodt in a statement said the New York charges were without merit and relied on “misperceptions” about the company, especially in light of state Attorney General Letitia James’ support for the $1.6 billion settlement.
Mallinckrodt also said it continues to manufacture “necessary, legitimate opioid medications” at an upstate plant.
The company is headquartered in Staines-Upon-Thames in Britain, and has U.S. offices in Missouri and New Jersey.
Opioids have contributed to more than 400,000 deaths since 1997, according to the U.S. Centers for Disease Control and Prevention.
Cuomo has estimated that opioids caused about $2 billion of insurance rate increases to be passed on to New Yorkers.
New York’s financial services department formally notified about 23 opioid manufacturers and distributors last year that they might face civil enforcement charges for contributing to rising insurance premiums.
It ordered Mallinckrodt to attend an Aug. 24 hearing at the regulator’s offices in Albany, New York.
The U.S. government on March 3 separately charged Mallinckrodt with defrauding Medicaid out of hundreds of millions of dollars on its top-selling Acthar Gel, which treats spasms in infants as well as multiple sclerosis.
In afternoon trading, Mallinckrodt shares were down 44 cents, or 12.7%, at $3.03.
(Reporting by Jonathan Stempel in New York; Editing by Bernadette Baum and Bill Berkrot)