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New Jersey-based pharmaceutical company Nostrum Laboratories has filed for Chapter 11 bankruptcy protection, reporting nearly $68.3 million in debt. The company, known for a bladder infection drug that saw a controversial price hike, is facing a combination of secured and unsecured claims totaling over $63 million.

Nostrum Labs Filed For bankruptcy : Financial Struggles and Settlement

Nostrum's bankruptcy filing, submitted on Monday, lists $30 million in secured claims and more than $33.2 million in unsecured claims. This move follows a $5.3 million settlement reached in October 2023. The settlement resolved allegations that Nostrum, under the leadership of CEO Nirmal Mulye, deliberately underpaid rebates it had agreed to provide to state Medicaid programs. These rebates were meant to offset the financial impact of a significant price increase for its bladder infection drug.

As part of the settlement, Nostrum agreed to additional contingent payments of up to $50 million if the company met certain earnings benchmarks. However, its current financial situation has raised doubts about the likelihood of reaching those targets.

Controversial Price Hike

Nostrum halted production of its bladder infection drug in January 2018 after the U.S. Food and Drug Administration (FDA) updated its guidelines to reduce lead levels in medications. Mid-2018 saw the company's reintroduction of the drug, which it labeled as a "reformulation." However, the reformulated drug did not undergo any changes in its active ingredients or potency.

Upon relaunching, the price of the drug skyrocketed from $474.75 to $2,392 per bottle. CEO Mulye defended the price increase, telling the Financial Times that it was a "moral requirement to sell the product at the highest price" in the interest of shareholders. This decision faced widespread criticism, especially given Nostrum's argument that its rebate agreement applied only to the previous version of the drug, not the reformulated one.

Nostrum Labs Filed For bankruptcy : Bankruptcy Proceedings

Nostrum Laboratories' case is being handled in the U.S. Bankruptcy Court for the District of New Jersey . The company is represented by attorney David L. Bruck of Greenbaum Rowe Smith & Davis LLP.

The Chapter 11 filing will allow Nostrum to reorganize its finances and potentially address its significant debts while continuing operations. The outcome of the case may affect ongoing settlement obligations and the company's future in the pharmaceutical industry.