Organization: Mallinckrodt PLC

Year: 2019

Whereas: 0

Resolved: Resolved: That shareholders of Mallinckrodt plc (Mallinckrodt) urge the Board of Directors (the Board) to report to shareholders by December 31, 2019 on the governance measures Mallinckrodt has implemented since 2012 to more effectively monitor and manage financial and reputational risks related to the opioid crisis in the United States (U.S.), given Mallinckrodt's sale of opioid medications and active pharmaceutical ingredients in opioid medications, including whether Mallinckrodt has assigned responsibility for such monitoring to the Board or one or more Board committees, revised senior executive compensation metrics or policies, adopted or changed mechanisms for obtaining input from stakeholders, or altered policies or processes regarding company lobbying activities. The report should be prepared at reasonable cost and should omit confidential and proprietary information.

Supporting Statement:Supporting Statement Opioid abuse is undeniably a public health crisis The Centers for Disease Control and Prevention reported that in 2017, opioid abuse caused nearly 48,000 U.S. deaths, or about 130 per day. The economic and social effects of the opioid crisis are profound. Opioid use and dependency, according to a recent Goldman Sachs study, is a key factor in why many men of prime working age in the U.S. are unable or unwilling to find work. Costs associated with opioid abuse strain patients, healthcare payers and state and local budgets. Mallinckrodt accounted for 43.8 million of the 236 million opioid prescriptions filled in 2016, according to IMS Health, and has come under scrutiny for its sales and marketing practices. In 2017, Mallinckrodt paid $35 million to resolve federal claims involving controlled substances, including opioids. In 2018, Mallinckrodt disclosed that it had received a grand jury subpoena from federal prosecutors, is under investigation by several state attorneys general, and faces 281 lawsuits related to opioid sales. In light of Mallinckrodt's failure to carry out an intended divestment of its opioid business, we believe that the Company should enhance oversight of risks related to opioids. Mallinckrodt discloses on its website steps it has taken to combat diversion and illegal sale of opioids, including founding the Anti Diversion Industry Working Group. We believe, however, that Board level oversight and governance reforms can play an important role in effectively addressing opioid related risks and that shareholders would benefit from a fuller understanding of governance mechanisms serving that function. For example, it is not clear from Mallinckrodt's Board committee charters or proxy statement whether a specific Board committee monitors opioid related risks, though the Compliance Committee charter mentions potentially opioid related matters such as DEA compliance, and whether the Board oversees payments to patient advocacy and professional organizations that may lobby on controlled substance regulation. Similarly, Mallinckrodt's most recent proxy statement does not indicate whether any opioid related objectives, such as promoting ethical conduct, were considered in assessing named executive officer performance for incentive compensation purposes.