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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. 

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