Up to $31M in bonuses at Purdue Pharma OK’d

STAMFORD — OxyContin maker Purdue Pharma gained a bankruptcy judge’s approval Wednesday to pay employee bonuses for 2022 that could total up to nearly $31 million, with Connecticut’s attorney general not voicing opposition to those payments.

The bonuses would be distributed among more than 480 of Stamford-based Purdue’s approximately 500 employees. Purdue officials have argued that the additional money is necessary to help combat high turnover and compete for new hires.

Speaking of the Key Employee Retention Plan payments of up to about $28.5 million that would apply to all but two of the employees for whom Purdue has proposed 2022 bonuses, Judge Robert Drain said in a remotely held hearing that it, “has been vetted with key constituents in the case and… there have been no objections. It has been modified to make it even more retentive and, I think, appropriately fair. Therefore, I conclude it is a proper exercise of the debtors’ business judgment.”

Among the eligible KERP bonus recipients, 18 are at the vice president level or higher and 465 comprise “middle management, professional employees and support and technical staff, which include scientific researchers as well as regulatory, compliance, quality and manufacturing personnel,” according to Purdue’s motion for the bonuses.

At the same time, Drain approved Key Employee Incentive Plan compensation of up to approximately $2.3 million for Purdue’s general counsel, Marc Kesselman.

“Today’s court approval recognizes the tremendous value that our employees bring to Purdue and to our goal of delivering billions of dollars in value for victim compensation and opioid crisis abatement,” Purdue said in a statement. “Their efforts are vital to our ability to manufacture and distribute FDA-approved products that benefit patients, progress our pipeline and advance our public health initiatives including overdose rescue medicines.”

In contrast with his resistance to previous years’ bonuses, Connecticut Attorney General William Tong has not expressed opposition to most of the 2022 bonuses. However, he is one of 24 state attorneys general who filed an objection to a proposed 2022 bonus of up to approximately $3 million for Purdue CEO and President Craig Landau. Drain is scheduled to review that item at a June 15 hearing.

Tong declined to comment Wednesday on the 2022 bonuses.

Even with the bonuses, attrition “has remained high,” with 19 resignations so far in 2022 — equal to a year-to-date “annualized voluntary turnover rate” of nearly 13 percent, according to Purdue’s motion.

Among the remaining employees, about 160 of them are based at the company’s headquarters at 201 Tresser Blvd., in downtown Stamford.

“The debtors continue to endure significant hiring obstacles (in the face of a broadly difficult and competitive market for talent); 18 headcount positions have opened year to date, joining five positions that opened but were not filled in 2021,” Purdue said in its motion. “Eleven of these positions are unfilled, and it remains extremely unlikely that the debtors will be able to find sufficient, if any, qualified replacements during this critical moment in these Chapter 11 cases. If not for the company’s prior annual compensation programs, the debtors believe that the attrition rate would have been significantly higher.”

Among previous years’ payouts, Drain approved last July Purdue’s plan to pay up to approximately $29 million in 2021 bonuses to most of its employees. The endorsement was conditioned on Purdue securing his approval of its settlement plan, which he granted last September.

More than two-and-ahalf years after filing for bankruptcy, Purdue is still trying to resolve the litigation related to its proposed settlement of several thousand lawsuits that allege it fueled the opioid crisis with deceptive OxyContin marketing. In March, eight states, including Connecticut, that had appealed Drain’s approval of the settlement framework announced they would accept a $6 billion national agreement with the company and the Sackler family members who own the firm.

But the settlement is not a done deal because district judge Colleen McMahon last December overturned Drain’s approval of Purdue’s plan. The company appealed McMahon’s ruling to the U.S. Court of Appeals for the Second Circuit. It is not clear when the Second Circuit will issue a ruling on the appeal.

If the Second Circuit finds that Drain properly confirmed the settlement plan, then Purdue would work toward emerging from bankruptcy, a process that could be completed within the next few months.

But if a party disagrees with the Second Circuit’s ruling, it could appeal to the U.S. Supreme Court. The Department of Justice’s U.S. Trustee still opposes Purdue’s proposed settlement terms.