Drug Companies Block Shareholder Votes on Price Transparency Proposals ­

3/6/2017 Drug Companies Block Shareholder Votes on Price Transparency Proposals ­ WSJ
https://www.wsj.com/articles/drug­companies­block­shareholder­votes­on­price­transparency­proposals­1488406027 1/2
Several major U.S. drug companies have squelched an investor campaign aimed at
forcing companies to disclose more information about when and why they raise prices.
In October, a group of institutional investors, including many with ties to religious
organizations, submitted shareholder proposals asking 11 U.S. drug companies,
including Pfizer Inc. and Merck & Co., to issue reports listing average annual price
increases for their top-selling drugs between 2010 and 2016, and to state the rationale
for the increases. The investors asked the companies to include the proposals on proxy
ballots that will be put to shareholder votes at annual meetings this spring.
But 10 of the companies plan to omit the drug-price transparency proposals from their
proxy ballots, generally on the grounds that they would interfere with “ordinary
business,” according to company documents filed with the Securities and Exchange
Commission.
An SEC rule allows a company to omit a shareholder proposal from a proxy ballot if the
proposal deals with the company’s ordinary day-to-day business operations, rather than
a “significant social-policy issue.”
The SEC notified 10 companies that it won’t pursue any enforcement actions if the
companies exclude the drug-price proposals, according to letters posted on the SEC’s
website. The investor group withdrew the transparency proposal it had submitted to the
11th drug company, Regeneron Pharmaceuticals Inc., because the company said it hasn’t
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https://www.wsj.com/articles/drug­companies­block­shareholder­votes­on­price­transparency­proposals­1488406027
HEALTH
Drug Companies Block Shareholder
Votes on Price Transparency Proposals
Investors’ group wants companies to disclose price increases over the years, and the
rationale
Merck called the proposal “a clear attempt to exert influence on the pricing decisions made by the Merck management
team.” PHOTO: ASSOCIATED PRESS
March 1, 2017 5:07 p.m. ET
By PETER LOFTUS
3/6/2017 Drug Companies Block Shareholder Votes on Price Transparency Proposals ­ WSJ
https://www.wsj.com/articles/drug­companies­block­shareholder­votes­on­price­transparency­proposals­1488406027 2/2
raised the prices of its drugs and shared information about its approach to drug pricing,
according to a spokeswoman for the investor group.
The investors, which own shares of the companies, are members of the New York-based
Interfaith Center on Corporate Responsibility. Different members of the group sent the
proposals to different drug companies.
Merck sent a letter to the SEC in January saying it planned to omit a price-transparency
proposal submitted by several Catholic religious orders. Merck called the proposal “a
clear attempt to exert influence on the pricing decisions made by the Merck
management team. Such an attempt is perhaps the perfect example of ‘micromanaging’
the business affairs of Merck,” the letter said.
A Merck spokeswoman said the company recently released information about its price
increases that allows people to understand its practices while protecting proprietary
information negotiated with customers.
Pfizer said in a letter to the SEC in January that it should be permitted to exclude a
transparency proposal submitted by Trinity Health, a Catholic hospital group, and other
religious shareholders. Pfizer said it has already addressed the underlying concerns of
the proposal by disclosing on its website and in SEC filings its rationale for pricing
decisions. A Pfizer spokeswoman declined to comment beyond the letter.
“We’re really disappointed the companies did not allow their shareholders to express
themselves on this issue,” said Donna Meyer, director of shareholder advocacy for
Interfaith member Mercy Investment Services Inc. of St. Louis, which runs retirement
funds for the Roman Catholic congregation Sisters of Mercy.
Ms. Meyer said Interfaith investors plan to attend several of the drug companies’ annual
meetings to ask boards of directors about drug pricing. She said price increases pose a
risk to the companies’ long-term prosperity because they could hurt corporate
reputations and trigger government action. She also said the U.S. health-care system
can’t afford continuing drug price increases, and the lack of transparency is hurting the
system.
The drug industry has faced mounting criticism for high and rising drug costs. In
response, some companies have put limits on their price increases this year, though the
median increase was little changed from last year, at 8.9%.
Some companies also have begun to release more information about pricing, including
Merck and Johnson & Johnson .
A J&J spokeswoman said the company’s transparency report “is a significant step
forward in addressing stakeholders’ transparency concerns.” She said the SEC
determined that the transparency shareholder proposal is “appropriately excluded”
from the company’s proxy statement.
Ms. Meyer said the Merck and J&J transparency reports don’t go far enough because
they don’t provide details about individual product price increases, and only provide
averages across the companies’ product lineups.
“We didn’t feel it was what the public needs to either decide on the value of a drug or to
try to keep drug prices within reason,” she said.
The other companies that petitioned the SEC to exclude the price transparency
proposals from proxy ballots are Amgen Inc., AbbVie Inc., Biogen Inc., Bristol-Myers
Squibb Co., Eli Lilly & Co., Gilead Sciences Inc., and Vertex Pharmaceuticals Inc.
Write to Peter Loftus at [email protected]
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