- Michael Pearson, the former chief executive of Valeant Pharmaceuticals, will collect around $10 million in severance pay and consulting fees from the beleaguered drugmaker, despite presiding over a near 90% drop in stock value over the past year.
- Valeant will pay Pearson $9 million in severance pay, along with as much as $850,000 in consulting fees over the next two years, according to a regulatory filing posted by the company Tuesday.
- Provided the contract is renewed each month, Pearson will collect $83,333 per month for consulting services through 2016, and $15,000 per month in 2017. Valeant will also give Pearson office space, access to an executive assistant, and tech support.
Pearson was replaced as CEO with former Perrigo head Joseph Papa last month, part of a sweeping overhaul of Valeant leadership after pharmacy scandals, misstated financials, and heavy criticism of the company's pricing tactics sunk the stock.
Additionally, activist investor and now Valeant board member Bill Ackman has helped usher in new members to the company's board over the past several months. Since March, eight new directors have joined the 14-person board.
The changes are meant to turn the page on a particularly disastrous first quarter and help Valeant move away from the aggressive pricing tactics with which the company has become synonymous.
In early May, Valeant announced it would form a new committee to oversee drug pricing and patient access. Shortly thereafter, the committee unveiled broader discounts for hospitals on Isuprel and Nitropress, two heart drugs which Valeant had jacked up prices on. Although hospitals are now eligible for up to a 40% discount depending on purchase volume, some have criticized the discounts for being insignificant compared to the sharp price increases taken by Valeant on the drugs.
Although Pearson has very much been the public face for Valeant's fall from grace, he is still being richly rewarded. In addition to the $9 million severance payment, Pearson will remain eligible for a pro-rated annual bonus based on his time as CEO over the first four months of 2016. Valeant will also continue to provide medical, dental, and vision health care coverage for Pearson and his dependents for two years.
Prior to his replacement, Pearson had been CEO of Valeant since 2008 after joining the company from the high-powered consultancy McKinsey. He brought with him a distinctive approach to biopharma, predicated on lean R&D, heavy acquisition of other companies, and sharp drug price increases.
While Pearson's approach was initially praised for eliminating much of the risk pharma companies face in conducting early-stage R&D, his strategy left the company more vulnerable to criticism over price increases.
Valeant is now under investigation by Congress, the Securities and Exchange Commission, and U.S. attorneys in New York and Massachusetts in connection with drug pricing and its pharmacy network.