(Bloomberg) -- Drug manufacturer Mallinckrodt Plc became the third major opioid maker to seek bankruptcy protection after being swamped by claims it profited from fueling the U.S. opioid epidemic.

The company said Monday it filed for protection from creditors in Delaware after reaching a broad consensus on a restructuring-support agreement. It intends to implement a $1.6 billion plan to resolve all opioid litigation. The filing also will help resolve a U.S. government probe into whether the company defrauded Medicaid via price hikes for its top-selling Acthar Gel.

The agreement was reached with state attorneys general and lawyers for cities and counties suing to recoup billions in tax dollars spent on the fallout from opioid addictions. Under the plan, Mallinckrodt will set up a trust to oversee payments and hand over warrants for nearly 20% of the company’s shares, according to a release.

The move comes as Mallinckrodt was readying for two upcoming opioid trials in which the company faced accusations it illegally marketed its opioid painkillers and failed to properly oversee large shipments of the highly addictive pills. A judge is likely to halt all litigation while the company seeks to implement its reorganization plan.

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“Mallinckrodt has been threatening bankruptcy for over a year, so this comes as no surprise,” Hunter Shkolnik, a lawyer for two New York counties who sued opioid makers and distributors over their mishandling of the pills, said in an emailed statement.

The development mirrors Purdue Pharma LP’s move to short-circuit opioid suits against the maker of OxyContin by filing for bankruptcy protection last year. The company is proposing a $10 billion settlement plan, that would turn Purdue over to the states and local governments and require the billionaire Sackler family -- which owns the drugmaker -- to come up with $3 billion. Some states and municipalities have opposed the offer, saying it doesn’t provide enough to deal with the public-health crisis.

Mark Trudeau, Mallinckrodt’s CEO, said in the release that the Chapter 11 restructuring “provides the best opportunity to maximize the value of the enterprise and position the Company for the future in light of the current challenges it faces.”

The plan will allow the company to shed as much as $1.3 billion in debt. It will also provide investors who hold guaranteed unsecured-note claims a pro rata share of $375 million of new secured second-lien notes due seven years after the company emergences from Chapter 11, according to the release.

The filing also paves the way for a $260 million settlement of U.S. government claims that Malllinckrodt executives cheated the government through what the government said were “meteoric” price hikes for its multiple-sclerosis fighting Acthar Gel. The money will be paid out over seven years and will go to states as rebates for the drug’s price hikes.

The company has agreed to dismiss its appeal of a judge’s ruling in March that government health regulators could recover rebates from the drugmaker over the Acthar Gel.

Along with the New York trial, Mallinckrodt also faced an upcoming trial of Tennessee officials’ claims it flooded the eastern part of the state with its opioid painkillers.

Tennessee officials and lawyers for an opioid-addicted baby contend the company acted as the equivalent of a drug dealer when it shipped large orders that wound up supplying some pill mills in the state, according to court filings.

In its Chapter 11 filing, Mallinckrodt listed estimated liabilities of $1 billion to $10 billion and assets in the same range. Mallinckrodt LLC, the company’s generic drug unit, also sought bankruptcy protection, according to court filings.

The main case is Mallinckrodt Plc, 20-12522, U.S. Bankruptcy Court for the District of Delaware (Wilmington).

(Updates with CEO’s comment in seventh paragraph)

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