The Illinois Department of Labor is investigating Gurnee-based Akorn Operating Company after company leaders shocked hundreds of Illinois workers Wednesday with news that the drug company was shuttering and they would be laid off within 24 hours.
Akorn CEO Douglas Boothe told employees Wednesday about the layoffs in a video obtained by and posted online by the Decatur Herald & Review. In the video, he says that the company planned to file for Chapter 7 bankruptcy this week after its leaders failed to find a buyer for Akorn.
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In the video, he says the company “did not receive an appropriate bid that would address outstanding liabilities, including outstanding debt.”
“This was not expected,” he said in the video. He said effective Thursday, all the company’s sites would be closed and all of its employees would be laid off. Akorn’s Illinois locations include its corporate headquarters and a distribution center in Gurnee, as well as a manufacturing facility in Decatur and a research and development facility in Vernon Hills.
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Boothe instructed all employees to spend the rest of Wednesday gathering their belongings, returning company equipment and securing files, as they would not be allowed back into the buildings Thursday.
“I realize this is a tremendous shock and it will take time to absorb the news and what it means to you, your colleagues and your families,” he said.
Boothe told workers they would be paid through Thursday as well as for any accrued and unused vacation time. He said health benefits would last through the end of this month, but there would be no severance or extended COBRA health insurance coverage.
Attempts to reach the privately held company for further comment were unsuccessful Thursday. The company also has locations New Jersey, New York and Switzerland.
The Illinois Department of Labor is investigating the situation, said spokesman Paul Cicchini on Thursday.
Under Illinois law, employers with 75 or more full-time workers are supposed to give 60 days notice of mass layoffs or plant closures. But Akorn did not file a WARN notice with the state until Wednesday evening.
“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 department said in a statement.
If the department finds violations, Akorn could face civil penalties. The Illinois Department of Commerce and Economic Opportunity is now “deploying rapid response resources to support impacted workers,” according to the statement.
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In the video, Boothe also said Akorn notified the U.S. Food and Drug Administration of its closure.
“The FDA is reviewing all drugs affected by this closure and is working with the other manufacturers to understand the supply nationwide,” said FDA spokesman James McKinney, in an email. “If the approved manufacturers cannot meet market demand, the FDA will add those affected medicines to our Drug Shortage webpage and continue working to resolve or lessen the impact of those shortages using all the tools we have available.”
Akorn also filed for bankruptcy in 2020, but that was a Chapter 11 bankruptcy which allowed the company to restructure. Akorn, which was once a public company, became a private one.
That previous bankruptcy came after a deal fell through that would have seen German health care company Fresenius Kabi buy Akorn for $4.75 billion. Fresenius Kabi walked away from that deal in 2018, citing Akorn’s alleged problems meeting regulatory requirements.
The company also received warning letters from the FDA in 2019 about manufacturing practices at its Decatur and New Jersey manufacturing plants.
More recently, in September, Akorn agreed to pay $7.9 million to resolve allegations that it caused Medicare to pay false claims for several of its drugs.
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More to come.
