Purdue Pharma allowed bonus payout in bankruptcy case
The judge overseeing the bankruptcy case for opioid-maker Purdue Pharma issued an interim order late Wednesday allowing the company and its subsidiaries to continue paying its employees, former employees and retirees.
The company estimates it will pay about $26 million in wages and benefits, including bonuses. The pharmaceutical giant and maker of the painkiller Oxycontin filed for bankruptcy as part of its plan to settle the litigation brought by more than 2,000 counties, municipalities and Native American governments who say the company fueled the opioid crisis.
Purdue Pharma’s long-standing annual incentive program pays out based on performance of the employee and the company. It’s in the best interest of the creditors and those who will ultimately receive payouts from the company, the judge said.
The actual payout earlier this year for calendar year 2018 was $33,290,000, according to court filings.
During the initial bankruptcy hearing Tuesday, none of the 70 attorneys participating had any objection to the motion to continue paying employees and retirees though the bankruptcy trustee opposed it, according to CNN’s Jean Casarez, who was present at the hearing.
Judge Robert Drain presided over the hearing Tuesday and issued the order Wednesday reiterating what he said in court. “Such relief is necessary to avoid immediate and irreparable harm to the debtors and their estates,” he said.
The order includes wages, severance obligations and incentive plan obligations, and workers compensation claims.
This filing does not protect members of the Sacklers — the billionaire family that owns the pharmaceutical giant. “Nothing in this order authorizes the debtors to advance and pay the legal costs of any member of the Sackler family, directly or indirectly,” the judge wrote in the order.
A final hearing on the matter will be held Oct. 10 and any objections or responses must be filed seven days prior to that hearing. If no objections or responses are received, the judge may enter the final order without holding a hearing.
During the hearing Tuesday, Purdue Pharma’s attorneys said paying the employees was crucial to ensure the value of the company and given the current climate, the company would not be able to replace them. No members of the Sackler family are employees of the company.
“To preserve the full value of Purdue for the benefit of the American public, it is critical that the company’s day-to-day operations be protected. Purdue employees’ deep technical expertise and know-how are essential components of the company’s business. Retaining our talented and dedicated employees is a key determinant of the company’s future value,” it said. “The company continues to operate as a lean organization, having downsized its workforce by over 65% since 2017.”
More than 70 attorneys showed up at a federal courthouse in White Plains, New York, on Tuesday for the first hearing in Purdue Pharma’s bankruptcy court proceedings.
Paul Hanly Jr., co-lead counsel for the multi-district litigation against opioid manufacturers, described it as the “largest and most complex case in American history.”
He said the sheer number of defendants, the differences among them and the number of plaintiffs all contribute to its complexity, along with “the huge amounts of money that are potentially needed to solve the opioid epidemic. And there are different estimates of that.”
“They range from $75 billion a year to $500 billion a year. So really, we are talking about potentially a case that, the value of which is approaching a trillion dollars, although no one expects that these companies would have the kind of money to fund that size of a settlement,” Hanly said.
Although Purdue is working to settle with some of the plaintiffs in the multi-district litigation, trials will still be taking place because there are many other manufacturers and distributors who are defendants.
Purdue estimates after bankruptcy filings are complete, it will provide more than $10 billion in funding to address the opioid crisis. That will include settlements with 24 state attorneys general, five US territories and attorneys in the multi-district litigation, the company previously said in a statement.