Pharmaceutical Companies and the Opioid Crisis

When pharmaceutical companies set targets for executive performance, and base the amount of their compensation on meeting those targets, they often use profit metrics that are not based on
Generally-Accepted Accounting Principles (like “Adjusted Earnings Per Share”) which routinely filter out legal settlement costs and fines from the end result.

We believe this is a salient issue for investors because performance metrics for executives help incentivize the right level of risk-taking. If they routinely filter out the real-world results of that risk-taking, the incentives are skewed and executives are not held accountable for their decisions.

An IOPA investor brief. Copyright 2023.