Drug company Akorn lays off hundreds, including 303 in Amityville, with no warning

An Illinois-based pharmaceutical company has filed for Chapter 7 bankruptcy and abruptly laid off all its employees, including hundreds working at an Amityville plant.

Akorn Operating Company LLC's shutdown of its operations Thursday included the layoffs of 303 people working at its Amityville plant at 369 Bayview Ave., according to a Worker Adjustment and Retraining Notification, or WARN, filed with the New York State Department of Labor on Wednesday. 

Akorn stated the cause for the layoffs was “economic,” according to the WARN filing, which the labor department posted on its website Friday.

Under New York State law, Akorn was supposed to have given 90 days’ advance notice of layoffs. The federal WARN requirement is for 60 days' notice.

Businesses that fail to file a WARN in New York State face a civil penalty of $500 per day of violation. Employers are also liable for back pay and other benefits for 60 days of the violation.

The New York Department of Labor did not respond to Newsday's inquiries about whether the agency was investigating the drug company.

Akorn’s corporate office, based in Gurnee, Illinois, could not be reached for comment.

Akorn president and chief executive officer Douglas S. Boothe told employees in a video call Wednesday that it was their last day of work and the company would be shutting down after being unable to find a buyer since last year.

“And despite the best efforts from all parties, and interest from multiple potential buyers, the company did not receive an appropriate bid that would address outstanding liabilities, including outstanding debt. Our company owners have just informed us they will not provide the additional financing required to continue to run the business and search for alternative options,” he said.

Employees would be paid through Thursday, and their health insurance will continue through the end of the month, but they will not receive any severance payments, Boothe said.

“The severance plan has been terminated in connection with the bankruptcy filing. And so, we will not be able to pay severance or provide any extended COBRA [Consolidated Omnibus Budget Reconciliation Act] coverage,” he said. COBRA coverage would have allowed employees to pay for an extension of group health benefits.

Workers sue over lack of notice

An employee at Akorn’s Amityville plant, Lisha Abraham, is the lead plaintiff in a class-action lawsuit workers filed against Akorn on Thursday for violating the WARN Act.

Akorn’s bankruptcy trustee will be responsible for responding to the lawsuit, said attorney Stuart J. Miller, a partner at Manhattan-based law firm Lankenau & Miller LLP who is representing the laid-off Akorn employees. 

“It’s very possible that in a Chapter 7 case, the only source of money in the estate [that’s not subject to secured creditors' liens] will be by way of actions the trustee may bring against other parties to recover money,” he said.

Employees were blindsided by Akorn's shutdown, they said Friday at a rally outside the Amityville plant, where the company made generic drugs, including the anesthetic lidocaine and fluticasone, the active ingredient in the nasal spray Flonase.

“We were all just dumbfounded,” said Bridget Garcia Jones, of West Islip, an environmental health and safety manager at the company. “They should have been transparent and notified us so we could make necessary decisions and plan accordingly.”

Leola Moses, 51, of Amityville, had worked for Akorn for nearly 28 years, most recently as a production line operator.

“I feel cheated, left out in the cold and not cared about. There was no warning. They didn’t even come in person,” she said. “I hope we get some justice — or at least a severance package.”

Matthew Di Carmine, 35, of Farmingdale, worked as a chemist at Akorn, testing products to make sure they were safe for consumers. He said he’s worried about finding a new job, given that about 50 people in his department all will be looking.

A probe in Illinois

The Illinois Department of Labor is investigating Akorn for not giving at least 60 days’ advance notice before laying off Illinois workers, as that state's WARN Act requires, the agency said in a statement.

The company laid off 610 workers at four locations in Illinois.

“Not only did the company fail to submit a WARN notice to the state prior to laying off employees, it gave its hardworking employees only 24 hours’ notice of permanent layoffs, which is inconsistent with industry best-practices and lacks basic consideration for their employees,” the Illinois Department of Labor said.

If the investigation finds violations, the Illinois Department of Labor said it will assess civil penalties against the company.

Assets vs. liabilities

Akorn filed for Chapter 7 bankruptcy, which is also known as a liquidation bankruptcy, in U.S. Bankruptcy Court for the District of Delaware on Thursday.

The company listed assets between $500 million and $1 billion, and liabilities of between $100 million and $500 million, in its bankruptcy filing.

On Feb. 17, Akorn lost access to cash after its lender was unwilling to extend an existing funding arrangement, the drugmaker’s executive vice president, Beth Zelnick Kaufman, wrote in the WARN sent to the Illinois Department of Labor on Wednesday.

“We were left with insufficient liquidity to continue ordinary course operations, continue seeking a buyer or buyers for our business, and retain our workforce,” she wrote.

Akorn also filed for Chapter 11 bankruptcy protection, which was a reorganization, in May 2020.

Akorn developed, manufactured and marketed specialty pharmaceuticals, including prescription, consumer health and animal health products, according to the company’s website.

The company conducted manufacturing in Amityville; Somerset, New Jersey; Decatur, Illinois; and Hettlingen, Switzerland.  In addition, it operated two research and development facilities — in Vernon Hills, Illinois, and Cranbury, New Jersey — and a distribution center in Gurnee, Illinois.