April 21, 2020
GOVERNOR CUOMO ANNOUNCES FIRST INSURANCE FRAUD ACTION AGAINST MAJOR OPIOID MANUFACTURER IN NEW YORK MARKET
Department of Financial Services Files Administrative Proceedings Against Mallinckrodt Over Role in Opioid Epidemic
DFS Alleges Mallinckrodt 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
Governor Andrew M. Cuomo today announced the New York State Department of Financial Services has initiated administrative proceedings and filed charges against Mallinckrodt plc and its subsidiaries, Mallinckrodt LLC and SpecGX LLC. These charges are the first to be filed in DFS' ongoing investigation into the entities that created and perpetuated the opioid crisis.
"The worst frauds are those that go beyond individual harm to institutionalized systemic fraud - and the opioid scheme is no exception," Governor 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."
According to DFS' Statement of Charges, Mallinckrodt was the most prolific manufacturer of opioid pills in the New York market, producing approximately 39 percent of the opioid pills that flooded New York from 2006 to 2014. From 2009 to 2019, Mallinckrodt supplied New York policyholders of commercial health insurance — a population that included approximately five million New Yorkers — with over one billion opioid pills.
DFS Statement of Charges alleges 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;
- Repeatedly overstated the benefits of long-term opioid treatment and failed to disclose the lack of evidence supporting such use;
- 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;
DFS alleges that Mallinckrodt made misrepresentations in a vast array of materials and by various means, including in the labeling and marketing of its branded opioids; in online educational materials directed towards both prescribers and patients; in materials published by Front Groups, seemingly independent third-parties that were in effect controlled by Mallinckrodt and others in the opioid industry; and in scholarly materials and textbooks used for training prescribing physicians. The charges allege that Mallinckrodt knew that the statements it was presenting as proven scientific facts were in fact fraudulent with no scientific basis.
According to DFS' Statement of Charges, Mallinckrodt violated two New York Insurance Laws. Section 403 of the New York Insurance Law prohibits fraudulent insurance acts and carries with it penalties of up to $5,000 plus the amount of the fraudulent claim for each violation; DFS alleges that each fraudulent prescription constitutes a separate violation. Section 408 of the Financial Services Law prohibits intentional fraud or intentional misrepresentation of a material fact with respect to a financial product or service, which includes health insurance and carries with it penalties of up to $5,000 per violation; once again, DFS alleges that each fraudulent prescription constitutes a separate violation.
The hearing will be held at the office of the New York State Department of Financial Services, One State Street, New York, New York, beginning on August 24, 2020.