By Maria Chutchian
(Reuters) -Purdue Pharma, the bankrupt maker of the OxyContin painkiller, on Monday obtained court approval to pay up to $7.1 million in incentive payments for five top executives if they meet certain goals, despite opposition from U.S. government lawyers.
U.S. Bankruptcy Judge Robert Drain in White Plains, New York, signed off on the executive incentive plan at the conclusion of a virtual hearing.
His ruling comes about two weeks after he said he would approve Purdue’s reorganization plan, which rests on a $10 billion settlement https://www.reuters.com/business/healthcare-pharmaceuticals/judge-rule-purdue-pharma-bankruptcy-plan-that-shields-sacklers-2021-09-01 of opioid-related litigation.
The judge said repeatedly during Monday’s hearing that he does not consider the incentive payments “bonuses” because even if they are paid out in full, the executives would still only fall in the middle of the total compensation range for executives at major pharmaceutical companies. The incentive payments, he said, are essentially part of the executives’ salaries, he added.
“It’s easy — too easy in fact — to say that an incentive program is always a bonus,” Drain said.
“No doubt my ruling will be construed by some as authorizing large bonuses to executives. I do not believe that is in fact the case here,” he added. “A bonus is something you get over and above median compensation.”
He rejected an argument from the U.S. Department of Justice’s bankruptcy watchdog, the U.S. Trustee, that Purdue failed to show that the 2021 incentive plan is truly incentivizing, rather than a bonus for executives who are simply showing up to work. The U.S. Trustee frequently objects to bonuses for executives of companies that are in bankruptcy.
The total potential payouts for the five executives for 2021 is $4 million to $5.4 million, depending on their ability to meet their goals. They could also collect up to an additional $1.7 million in the form of long-term incentives. To receive their bonuses, the executives would have to meet a variety of targets, including meeting deadlines with respect to testing and development of non-opioid products, as well as operating profits, net sales and operating losses, according to court papers.
The targets also include the implementation of a diversity, equity and inclusion plan through the end of 2021.
If the executives meet the goals, they would receive their bonus payments on June 30, 2022.
Drain approved Purdue’s reorganization plan on Sept. 1, but the process of implementing it is ongoing. The plan rests on a $10 billion settlement that resolves thousands of lawsuits accusing the company and its owners, the Sackler family, of fueling the opioid crisis through deceptive marketing of its products.
The Sacklers contributed approximately $4.5 billion to the settlement in exchange for the release of future opioid-related litigation.
Under the plan, Purdue will reorganize as a public-benefit company with profits steered toward victims of the crisis through opioid abatement programs.
A handful of states that opposed the settlement have already filed appeals.
More than 500,000 Americans have died since 1999 from opioid overdoses, according to the Centers for Disease Control and Prevention.
(Reporting by Maria ChutchianEditing by Chris Reese, Lisa Shumaker and Mark Porter)
