April 07, 2016

Drug Company Steps Up Contributions to Attorneys General Group Amid Legal Trouble

By John Morgan

Mallinckrodt PLC, a St. Louis-based pharmaceutical manufacturer fending off investigations in several states, has increased its donations to groups representing the nation’s attorneys general, who are often responsible for state investigations, in recent years. In 2015, Mallinckrodt significantly increased its donations to Republican Attorneys General Association (RAGA) after it revealed in Securities and Exchange Commission (SEC) filings that it was the subject of an investigation by several states for its drug pricing and reimbursement practices. 

Since the beginning of 2013, Mallinckrodt has donated $25,000 to the Democratic Attorneys General Association (DAGA), $25,000 to the Republican State Leadership Committee (RSLC), and $126,200 to the RAGA, which was formerly part of the RSLC. Prior to 2015, the company was a relatively small donor to the groups, contributing no more than $25,000 to a single organization in a given year. Then, in 2015, Mallinckrodt stopped giving to the DAGA and quadrupled its contributions to the RAGA, giving $101,200.

The jump in donations to the GOP group started soon after the drug company was notified that it was under investigation by Texas’s attorney general. In November 2014 the Texas Attorney General’s Office informed Mallinckrodt it was investigating allegations the company reported false drug pricing information and reimbursement rates to Texas’s Medicaid program. The company later reported in June 2015 that a number of states were investigating antitrust claims related to a company Mallinckrodt had purchased in 2014 called Questcor. 

With its increased contributions to the RAGA, Mallinckrodt may be following a playbook used by other corporations fighting off investigations by state attorneys general. In 2014, the New York Times published a series of reports detailing how corporations facing state-level lawsuits and investigations court favor with attorneys general by donating to the RAGA and the DAGA in order to gain access to the law enforcement officials. The RAGA and the DAGA are known for their extravagant corporate-sponsored annual conferences in which they invite dozens of attorneys general to luxurious resorts for long weekends with corporate executives, lawyers and lobbyists. At these events, special interests have an opportunity to cozy up to the same law enforcement officers who may be investigating or prosecuting their corporate clients. 

Formerly a subsidiary of Covidien, Inc., Mallinckrodt is one of the oldest pharmaceutical companies in the U.S. It is best known for producing opioids and a line of specialty drugs for rare diseases. But the company has also had its fair share of controversy. In addition to the current Texas Medicaid investigation, from 2008 to 2015 Mallinckrodt was involved in a similar lawsuit in Utah. It was one of several pharmaceutical firms named as defendants in a case in which the state accused the companies of overcharging Medicaid for certain drugs and reporting false pricing information. In December 2015, the state of Utah finally settled the case, resulting in a one-time cash payment from Mallinckrodt. The amount the company paid was not disclosed in SEC filings.

Mallinckrodt made its first contributions to political organizations representing state attorneys general in 2013 when it contributed $15,000 to the DAGA and $25,000 to the RSLC, which housed the RAGA until 2014 when the AGs group spun off on its own. It’s unknown exactly why the company started contributing to the attorneys general groups that year, though the donations started a few months after Mallinckrodt broke off from parent company Covidien to become an independent, publicly-traded company incorporated and tax-domiciled in Ireland.

In addition to the Medicaid allegations, the company has faced a number of legal problems relating to its acquisition of Questcor, a company known for increasing the price of its infant epilepsy treatment, Acthar Gel, by 1,300% overnight. In April 2014 Mallinckrodt announced its intent to purchase Questcor for $5.6 billion, primarily to acquire the rights to the highly profitable Acthar Gel. In addition to the drug rights, Mallinckrodt also inherited Questcor’s legal liabilities. Two months after the announcement, Mallinckrodt received a subpoena and request for documents from the Federal Trade Commission (FTC) seeking information for its investigation into whether Questcor violated antitrust laws. In 2015, the company reported that a small number of states had “commenced similar investigations.”                          

Mallinckodt made its first $50,000 contribution to the RAGA in February 2015, following up with a $1,200 in-kind contribution in November and another $50,000 contribution in December. By increasing its contributions to the RAGA in 2015, Mallinckrodt secured additional opportunities to engage with GOP attorneys general and their staff. According to documents obtained by the New York Times, which are from 2014, contributors who give between $50,000 and $125,000 to the RAGA, as Mallinckrodt did in 2015, gain an additional pass to RAGA meetings and access to exclusive events as well as an “[a]nnual opportunity to lead private briefings with Republican Attorneys General during RAGA events.” Such opportunities could prove valuable for a company facing investigations by multiple state attorneys general. 

Arizona Steps Into the Dark

Arizona should take heed: beware the ides of March. The same day ethics complaints were filed against four members of the Arizona House—March 15, known as the Ides of March for the first full moon of a new year and the famous line in Shakespeare’s Julius Caesar—a House panel passed a bill that would open the floodgates for secret money in the state’s elections. After passing several different House panels, the bill passed the full House this past Monday. With a potential ethics investigation looming for state representatives—including the House Speaker—Arizona should be moving toward more transparency, not becoming “ground zero in [the] fight over secret political spending.” Read More ›

We’ve Got Some Questions for the Trump Foundation

In response to our complaint filed last week that the Trump Foundation appeared to have illegally given a contribution to a political group supporting Florida Attorney General Pam Bondi at a time when her office was reportedly looking into claims against Trump University, the Trump campaign offered a winding explanation that asks more questions than it answers. Read More ›

Congress Has a Miami Vice: Non-Florida Members Spent $52K in Miami Beach in 2015

Rep. Bill Shuster (R-PA) caught flack last month for hanging out poolside in Miami Beach, FL with lobbyists for Airlines for America (A4A), the trade association that represents the major air carriers, just after the House committee he chairs approved legislation sought by the airlines. As Citizens for Responsibility and Ethics in Washington pointed out, it was hardly the first time Rep. Shuster spent time at a tropical resort in the name of raising campaign and PAC funds from special interests. Read More ›

When Checks and Balances Fall Short: Ethics Oversight Needed

In case it wasn’t already clear, having accountability measures in place for elected officials is crucial. Unchecked power is a formula for corruption. Perhaps nowhere has this been more clear recently than in state-level politics in New Mexico and Mississippi, both of which lack appropriate accountability systems and both of which have faced local scrutiny and public outrage after widely reported ethical issues, including public officials using campaign funds for personal expenses. Read More ›

Lawsuit Isn’t First Time 60 Plus Association Has Been Accused of Lying to the IRS

The 60 Plus Association, the seniors-focused conservative nonprofit that has spent millions on influencing elections, is in disarray. Last month, four of the group’s board members, including founder and longtime chairman Jim Martin, filed a lawsuit against another set of board members that includes 60 Plus’s president Amy Noone Frederick. Read More ›

National Rifle Association Increases Contributions to State Political Groups in 2015

The National Rifle Association (NRA) is considered one of the most powerful political organizations in America, capable of fighting off meaningful gun control measures, in part, because of the millions the gun lobby pours into politics. Observers have mostly focused on the NRA’s campaign contributions and express advocacy for candidates in congressional elections, but the gun group is also a force on the state level. Read More ›

© 2015 Citizens for Responsibility and Ethics in Washington, all rights reserved.
• 455 Massachusetts Avenue NW • Sixth Floor • Washington, DC 20001 • 202-408-5565 •

Citizens for Responsibility and Ethics in Washington®, and the
“CREW | Citizens for Responsibility and Ethics in Washington” wordmark are registered trademarks.