A simmering feud between the federal government and Mallinckrodt (MNK) took a new turn as the Department of Justice filed a lawsuit accusing the company of deliberately underpaying hundreds of millions of dollars in Medicaid rebates, which were tied to the price of its most important medication, the Acthar Gel treatment.

Under federal law, drug makers are required to pay quarterly rebates to state Medicaid programs in exchange for coverage of their medicines. These rebates include a provision that is designed to insulate the programs from price hikes that outpace inflation, and companies must pay rebates based on 1990 pricing or whenever a medicine was first marketed.

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