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Indivior is facing the prospect of a shareholder revolt at its annual meeting this week after the London-listed drugmaker maintained bonuses for its former chief executive, despite him being jailed for his role in the US opioid crisis.
Shaun Thaxter, the ex-CEO, was sentenced to six months in federal prison last year and agreed to pay $600,000 in fines and forfeiture after pleading guilty to a misdemeanour of causing the company to share false and misleading information about the safety of Suboxone Film with a state regulator. The medication is used to treat opioid use disorder.
Shareholders and big proxy advisers have lashed out at the company’s decision to retain awards made to Thaxter under its long-term incentive plan, despite the reputational hit to Indivior from the legal proceedings.
Institutional Shareholder Services and Glass Lewis, the influential advisory groups, have recommended investors vote against the company’s pay report, questioning why Indivior did not apply malus and clawback provisions, which enable businesses to reduce or cancel bonuses or force executives to pay them back in certain circumstances.
According to ISS, Thaxter left the company with more than 1m in outstanding shares, worth more than $1.5m, which do not vest until 2022 and 2023.
ISS said: “As a lead executive of the business since 2009, Shaun Thaxter is ultimately accountable for the financial and reputational harm suffered by the company in connection with the mis-selling of Suboxone.”
A top 20 shareholder was also critical of the remuneration committee’s decision to treat Thaxter as a “good leaver” and maintain the awards despite the prison sentence.
The US opioid epidemic has cost about half a million lives over the last 20 years, according to the US Centers for Disease Control and Prevention, as many Americans became addicted first to prescription opioids and then to illegal versions of the drugs. The US Department of Justice, state attorneys-general, and localities have pursued opioid makers in court, hoping to obtain restitution for the huge health and law enforcement costs of dealing with the fallout.
Indivior said the remuneration committee had determined to allow him to retain his outstanding LTIP awards “based on Mr Thaxter’s leadership that produced years of positive operational performance, and the absence of any findings of personal wrongdoing or malfeasance”.
Suboxone Film, which contains buprenorphine and naloxone, is designed to treat opioid addiction. The justice department accused Thaxter of asking employees to devise a strategy to win preferred drug status for it with MassHealth, the Massachusetts regulator. Some employees then shared false and misleading safety information about the risk of accidental exposure for children.
MassHealth later announced it would provide access to the drug for patients with children under six, who received Medicaid, the US government-backed health insurance programme for people on low incomes.
Thaxter was not accused of intentionally misleading MassHealth. Wick Sollers, Thaxter’s lawyer, said: “We believe the determination that Mr Thaxter should be treated as a ‘good leaver’ was entirely appropriate under the circumstances of his case, which established that he was unaware of any wrongdoing when it occurred and authorised corrective action after he learned of the issue.”
Thaxter is one of the few pharmaceutical executives to have faced jail for charges associated with the opioid crisis. He led the company from 2009 until last year, shortly before he pleaded guilty to the charge, including when it was part of Reckitt Benckiser.
Reckitt paid $1.4bn in 2019 to resolve its liability to the US over the marketing of Suboxone. Indivior and its subsidiary Indivior Solutions have also previously agreed to pay $600m to resolve related liabilities.
Thaxter was paid a total of $2.1m for the 2019 financial year, as well as $557,300 in 2020. After his departure in June 2020, he received a lump sum of more than $1m in lieu of salary and benefits to cover his contractual 12-month notice entitlement.
ISS also advised shareholders to vote against the re-election of the chair of the remuneration committee, arguing the company’s “decision to treat Thaxter as a good leaver . . . raises serious questions about its independence and judgment”.