By Jonathan Randles

Senate Democrats are challenging OxyContin maker Purdue Pharma LP's request to pay its chief executive a bonus that could total millions of dollars while the company is in bankruptcy, saying such an award would be offensive to the thousands of families harmed by the opioid crisis.

Companies restructuring their affairs in chapter 11 commonly seek to pay executive bonuses either right before or during a bankruptcy to hold on to top management, though the practice has been controversial. Purdue CEO Craig Landau could get between $2.6 million and $3.5 million under an executive incentive program the company is proposing in the U.S. Bankruptcy Court in White Plains, N.Y., dependent on the drugmaker hitting certain performance targets.

Five Senate Democrats sent a letter Monday urging the judge overseeing Purdue's bankruptcy, Robert Drain, to reject the proposed bonus, saying Mr. Landau led Purdue during a period during which the company was accused by state and federal authorities of fueling the opioid crisis through misleading marketing of OxyContin.

In response to the letter, Purdue said that stable leadership is critical to a successful reorganization and that Mr. Landau has kept the company profitable "in order to maximize value for claimants and the American public."

Judge Drain last year approved an earlier round of bonuses for Purdue's executive team after the company agreed to reduce the size of the awards.

The Justice Department is seeking billions of dollars in damages from Purdue, alleging that from 2010 to 2018 the company paid kickbacks to doctors and specialty pharmacies and marketed OxyContin to prescribers who wrote medically unnecessary prescriptions, according to papers filed in the bankruptcy court.

Purdue has denied the allegations and said it is committed to alleviating opioid addiction.

The letter is signed by Democratic Sens. Tammy Baldwin of Wisconsin, Maggie Hassan of New Hampshire, Tina Smith of Minnesota, Joe Manchin of West Virginia and Richard Blumenthal of Connecticut.

"To provide Mr. Landau with this bonus is to endorse the very behavior for which Mr. Landau has been sued by multiple states," the senators wrote, noting that during the bankruptcy process, more than 122,000 people have filed personal injury claims related to opioid products made by Purdue. Bonus payments outlined in Purdue's incentive plan "should not be made while these families continue to wait for justice," the letter said.

Mr. Landau joined Purdue in 1999 and has served as CEO since 2017. Purdue said in court papers when it filed for chapter 11 protection last year that under Mr. Landau's leadership, the company "is taking meaningful actions to address the opioid crisis."

The CEO is one of eight Purdue executives who would be entitled to bonuses under the proposed incentive program. Total awards available under the program range between $7.4 million and $9.86 million, court papers said.

Purdue is arguing the bonuses are needed to keep its leadership team together and motivated as they navigate the chapter 11 case and the coronavirus pandemic, which has amplified the "extreme strain" the workforce has been under. The company also said its leadership team has made progress on a global settlement that would help address the opioid crisis.

A hearing in bankruptcy court on Purdue's request to pay the bonuses is scheduled for Sept. 30.

Purdue filed for chapter 11 bankruptcy protection last year, seeking to implement a multibillion-dollar settlement plan with states and local governments that had sued the company.

--Sara Randazzo contributed to this article.

Write to Jonathan Randles at Jonathan.Randles@wsj.com

(END) Dow Jones Newswires

September 21, 2020 18:06 ET (22:06 GMT)

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