Travis Bornstein took to the stage last summer at the International Brotherhood of Teamsters’ annual convention in Las Vegas to talk about his son Tyler, who died of an overdose at 23.
The father, a former Marine and president of a union chapter in Akron, Ohio, told the audience at the Paris Hotel how Tyler got hooked on painkillers after multiple elbow surgeries. It eventually led to a heroin addiction.
Bornstein’s speech rallied the union’s 1.4 million members and its more than $100 billion of pension and benefit assets around one goal: Demand accountability from firms that it deems to be responsible for helping fuel America’s opioid crisis and the executives who profited from it. First on the list: McKesson Corp., the nation’s largest drug distributor, whose $198.5 billion in annual revenue last fiscal year was fourth-highest among U.S. companies and more than Exxon Mobil Corp.’s, according to data compiled by Bloomberg.
“We’re trying to hold these big companies responsible and accountable for what’s going on in America,” Bornstein said Friday in a telephone interview. McKesson’s board “needs to take a long, hard look in the mirror, a deep breath and a step back on what they’re doing to our country. Everything isn’t about money.”
When McKesson’s board and executives gather near Dallas for their annual shareholders meeting on July 26, they’ll be greeted by a throng of picketing Teamsters. Representatives of the union, which owns more than $30 million of McKesson shares, will call on investors to reject the company’s executive-pay plan and for the board to claw back some of Chief Executive Officer John Hammergren’s compensation.
“We take our responsibility to help manage the safety and integrity of the pharmaceutical supply chain extremely seriously and are committed to maintaining — and continuously improving — strong programs designed to detect and prevent opioid diversion,” McKesson spokeswoman Kristin Chasen said in an emailed statement. “We are doing everything we can to help address this crisis in close partnership with doctors, pharmacists, government and other organizations.”
The opioid epidemic has emerged as one of the nation’s most pressing health crises, claiming a life every 19 minutes, according to the U.S. Surgeon General. An estimated 2.7 million people over age 26 abused painkillers in 2015, resulting in 33,000 deaths that year. More than 20 states, counties and cities have sued drugmakers, such as Purdue Pharma Inc. and Johnson & Johnson, and distributors including McKesson and AmerisourceBergen Corp., claiming they aggravated the crisis with misleading marketing and aggressive distribution.
As the Teamsters see it, McKesson played a central role. The company, a middleman between drugmakers and pharmacies, ships millions of doses of opioids each year. It’s required to monitor those distributions and report suspicious orders to federal authorities. Still, the company delivered so many painkillers to West Virginia’s Barbour County over a five-year period that it equaled 15,445 doses per anticipated patient, or 210 doses per citizen, the union said in a Nov. 15 letter to McKesson’s board.
The drug distributor has said it doesn’t manufacture or prescribe opioids. The company has spent millions of dollars building a monitoring program for controlled substances to oversee ordering, report dubious cases to the Drug Enforcement Administration and educate customers on how to identify abuse, Edward Mueller, McKesson’s lead independent director, wrote in a July 14 letter to shareholders.
Still, in the past decade, McKesson has twice settled DEA allegations that it failed to report suspicious orders of controlled substances. As a result, the company can’t sell such products from distribution centers in four states for several years, and it has paid a combined $163 million in civil penalties.
This shows “a dearth of accountability and visible action” by directors and executives, the Teamsters said, urging the board to appoint an independent committee to investigate allegations raised in lawsuits and tweak pay for senior managers to include metrics tied to compliance.
The union also called on McKesson investors to vote against the executive pay program and support its shareholder proposal to appoint an independent chairman, stripping the CEO of that role. The union noted that Hammergren, 58, has received above-target bonus payouts for years, partly because of the board’s favorable assessment of his performance in meeting the company’s ethical standards.
Hammergren has taken home $781 million since becoming sole CEO in 2001, according to a Bloomberg Pay Index tally of his salary, bonuses, perks, vested stock and exercised options.
Institutional Shareholder Services Inc. and Glass Lewis & Co., the nation’s largest proxy advisers, joined the Teamsters this month in recommending that investors reject McKesson’s compensation plan. ISS criticized the board for repeatedly boosting executive bonuses on the premise of strong individual performance while failing to mention how the company’s role in the opioid controversy has impacted pay decisions. Both proxy advisers urged shareholders to support the Teamsters’ proposal to split the CEO and chairman roles.
In his letter, Mueller defended the board’s work, arguing that Hammergren’s total direct compensation had decreased by 27 percent in the past five years even as McKesson shares returned more than 75 percent.
The recent campaign by the Teamsters doesn’t help to “address the root causes of this tragic epidemic,” and the union’s beef is tied to a long-running contract dispute with McKesson involving workers at a Florida distribution center, Mueller wrote. He asked shareholders to approve the pay program and reject the union’s proposal to split the CEO and chairman roles. “I can assure you that McKesson’s board of directors takes its independent oversight responsibilities seriously.”
The Teamsters, meanwhile, are playing the long game.
“I don’t claim to be the smartest person in the room,” Bornstein said in his speech last summer. But, reminding the audience of his service as a Marine, “I do know how to stand up and fight like hell until the mission’s accomplished.”