Mallinckrodt's Bankruptcy Plan Approved, Wiping Out Over $1B Meant for Opioid Overdose Crisis

Mallinckrodt plc MNKTQ, one of the largest manufacturers of prescription opioids in the U.S., has secured court approval for a plan that erases over $1 billion in payments intended for people with a substance use disorder while transferring control of the pharmaceutical company to its lenders. 

This development marks a significant step for Mallinckrodt, as it paves the way for the company to emerge from bankruptcy just a few months after filing for Chapter 11 protection.

This development represents a setback for governments and individual addicts who have filed lawsuits seeking compensation from drugmakers for their role in the opioid crisis, the Wall Street Journal noted. 

The legal battle spans nearly a decade, with over 3,000 lawsuits from states, Native American tribes, and counties alleging that drugmakers, pharmacies, and distributors downplayed the risks of painkillers and failed to stem their distribution.

Some opioid manufacturers lacking the financial resources to settle these lawsuits have turned to bankruptcy as a resolution.

Mallinckrodt had previously agreed to pay $1.7 billion into a trust for over eight years as part of a deal reached during its initial bankruptcy in 2020. 

Under the approved bankruptcy reorganization plan, Mallinckrodt's existing shares will be canceled, and various creditor groups will receive new shares in the reorganized company. 

There are also discussions about potentially selling its generics business, which includes opioid production.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.