Teamsters urge McKesson shareholders to reject CEO pay plan amid opioid probe

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The International Brotherhood of Teamsters union is urging shareholders of drug giant McKesson Corp. to vote down the company’s proposed executive pay plan amid lawsuits and a congressional investigation into the firm’s role in the nation’s opioid epidemic.

The Teamsters also have called for McKesson stock owners to support a proposal to appoint an independent chairman to lead the company’s board of directors, according to a letter the union recently sent to McKesson shareholders. McKesson CEO John Hammergren doubles as board chairman. McKesson will hold its annual shareholders meeting July 26 in Irving, Texas.

Earlier this year, McKesson paid a record $150 million fine to the U.S. Justice Department to settle allegations that the company failed to report “suspicious” prescription drug orders to the Drug Enforcement Administration. Meanwhile, Hammergren — one of the highest paid executives in the nation — got a $1.1 million boost to his bonus, according to the union, which is a minor McKesson shareholder.

“The opioid epidemic isn’t just a tragedy of human loss — it also reflects a profound lack of corporate responsibility and accountability at the highest levels,” said Teamsters General Secretary-Treasurer Ken Hall, who lives in West Virginia. “As the largest wholesale drug distributor, McKesson must confront the business practices and structures that helped fuel the crisis, rather than reward those that perpetuate them.”

Hammergren has made more than $368 million since 2012 and has a guaranteed pension of $114 million when he retires, according to an executive compensation analytics firm cited by the Teamsters. The union says the company insulates executive pay from legal and regulatory liabilities, such as a spate of recent lawsuits and the congressional probe.

“Until the costs of the opioid crisis shows up in CEO Hammergren’s paycheck, we don’t expect there to be meaningful change,” said Hall, who also serves as president of Teamsters Local 175 in South Charleston.

Hall said McKesson’s “entanglement” in the opioid epidemic — a record number of Americans died last year after overdosing on heroin, fentanyl and prescription painkillers — requires independent oversight.

“In view of mounting legal, financial and reputational risks, McKesson’s board needs independent leadership to safeguard the interests of the company and our country,” Hall said.

In a statement, McKesson said shipping controlled substances, which include prescription pain medications, is only a small part of the company’s business. The firm said it has taken numerous steps to help combat the opioid epidemic under Hammergren’s leadership.

“McKesson and its shareholders have been well served during John Hammergren’s service as both CEO and chairman of the board,” the company said. “John’s in-depth knowledge of the healthcare industry and of the complex businesses and operations of the company allows him to lead the board’s work and focus, ultimately helping deliver long-term value to our investors.”

McKesson is the fifth-highest revenue-generating company in the United States, according to Forbes.

Earlier this month, a congressional committee directed McKesson and two other drug wholesalers to turn over records that show the companies’ shipments of prescription pain pills to West Virginia. The House Energy and Commerce Committee, in May, gave McKesson until June 8 to disclose the number of oxycodone and hydrocodone pills sold in West Virginia from 2007 to 2016.

Also, McKesson has hired an outside law firm to investigate allegations in a lawsuit filed last year by West Virginia Attorney General Patrick Morrisey that accuses the company of flooding the state with highly addictive prescription painkillers. The investigation came at the request of the Teamsters union, which has pension and benefit funds that invest in McKesson.

After finishing the investigation, McKesson’s special review committee plans to issue recommendations on how to respond to the Teamsters’ demands. McKesson’s full board will have the final say on the company’s response. The review committee also has the power to hire advisers.

McKesson has appointed three of its board members to oversee the investigation.

In January 2016, Morrisey filed suit against McKesson, alleging the company awarded bonuses and commissions to sales managers while “West Virginia was drowning in millions of doses of highly addictive prescription painkillers.”

Between 2007 and 2012, McKesson shipped 54.3 million oxycodone pills (typically sold under the brand name OxyContin) and 46.2 million hydrocodone tablets (Lortab, Vicodin) to West Virginia, according to the state’s lawsuit.

Only two drug wholesalers shipped more prescription opioids to West Virginia during those years.

In November, Hall predicted that Morrisey’s lawsuit might “trigger an avalanche of follow-on” lawsuits against McKesson. During the past five months, about a dozen counties, cities and towns in West Virginia have filed suit against McKesson — or announced their intention to do so. The lawsuits also name other drug wholesalers as defendants.

Reach Eric Eyre at ericeyre@wvgazettemail.com, 304-348-4869 or follow @ericeyre on Twitter.

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