As Purdue Pharma undertakes the laborious bankruptcy process, plaintiffs in thousands of opioid suits are looking to lock in settlement funds from the stripped-down drugmaker. Purdue—for its part—is hoping to secure incentives for its employees in the meantime.
Purdue has asked permission to pay out more than $34 million in annual and long-term incentives to its employees as the company undergoes a court-supervised restructuring, according to a Chapter 11 motion filed Monday in the Southern District of New York.
As part of its request, Purdue hopes to pay $26.5 million by March 2020 for its annual incentive plan, which awards employees based on personal performance and the financial performance of the company, Purdue attorneys wrote. The drugmaker is also seeking $7.9 million in its long-term cash incentive program, which covers three years of employee performance.
Attorneys for Purdue argued the two programs were “critical” as an employee motivation tool but said the plan would not be used to pay company “insiders” prior to a signed settlement.
In an emailed statement, Purdue said the incentive funds were important tools to retain employees and are standard across pharma. However, the drugmaker didn’t specify which of its 700 employees were eligible for the incentives or whether the incentives were appropriate given the company’s bankruptcy filing.
“Retaining our talented and dedicated employees is a key determinant of the company’s future value,” the company said. “These bonus payments at the company are awarded through long standing annual benefit plans, are reasonable in amount and similar programs are commonplace at most companies.”
While the incentive plans may be standard for the industry, Purdue’s current financial state is not. The company is wrapping a record-setting settlement with 24 states and thousands of local plaintiffs over its marketing of powerful opioid OxyContin.
Monday, Purdue agreed to offer up at least $10 billion to help fight the opioid crisis that the drugmaker itself allegedly helped create. As part of the deal, the company filed for bankruptcy and intends to restructure as a public benefit trust to provide the free drugs and financial contributions that make up the majority of the settlement.
Under the arrangement, the company’s billionaire founding family, the Sacklers, will chip in at least $3 billion, and Purdue will provide overdose reversal medicines plus proceeds from ongoing sales.
Purdue’s settlement would make it the first drugmaker to strike a deal in a multidistrict litigation in Cleveland that has roped in around 2,000 cities, towns and villages. Three other drugmakers—Endo, Allergan and Mallinckrodt—have separately settled with two Ohio counties but have yet to reach massive deals of their own.
The Purdue deal would immediately rank as the single largest settlement ever struck by a drugmaker, but more could be on the way as the Cleveland litigation proceeds. Despite 24 states signing on to the agreement, other state attorneys general have pledged to fight Purdue’s bankruptcy in the hopes of derailing the deal.
So far, those bankruptcy filings have not only shed light on Purdue’s corporate structure but also the firm’s attempts to spin the narrative as opioid lawsuits have piled up.
According to The Intercept, Purdue retained controversial PR firms Purple Strategies and Dezenhall Resources—the corporate spin doctors who worked with BP after the disastrous 2010 Deepwater Horizon oil spill. Purdue said in a filing it owed the two firms $300,000 for services rendered.