I’ve been in conversation with executives at a half-dozen major pharmaceutical companies, regarding the issue of anti-competitive practices and drug pricing.
One of the most common things I’ve heard, from every corner, is that the drug pricing system, particularly in the United States, is terribly flawed. The incentives are all wrong, the structure is needlessly complex, the middlemen benefit, and the patients—especially those facing poverty, and racialized communities—are most at risk.
Despite these almost universal complaints about the system, the ugly truth is that no one other than patients seems to have any interest in changing it. In fact, the industry seems to be dedicating an incredible amount of resources to delaying or stopping any efforts to reform that system.
The pharmaceutical sector’s primary trade association, PhRMA, is one of the largest lobbying organizations in the country. In 2020, it raised nearly $527 million, and spent roughly $506 million, including multi-million-dollar donations to numerous organizations like the American Action Network, for opposing congressional efforts to address drug pricing.
PhRMA also sits on the board of the American Legislative Exchange Council (ALEC), which has been involved in highly controversial lobbying activity including advocating for the privatization of Medicare and Medicaid, and opposing drug pricing reforms and prescription drug importation.
This is only scratching the surface of the lobbying spend by the sector, which is distributed through countless outside organizations, “patient advocacy” groups, as well as each company’s own direct lobbying.
Ironically, some of the companies on PhRMA’s board include those that have published policy statements encouraging fair pricing and access to medicines, two principles that are ill-served by said lobbying. For example, Johnson & Johnson has a Position on Universal Health Coverage which calls for “broad and timely access to our medicines at sustainable prices that aim to be locally affordable.” Gilead Sciences says in its Policy Position Statement, “The price of medicines should never be a barrier to access”.
Due to these reasons and more, SHARE will be at the Johnson & Johnson annual meeting on April 28, where shareholders will be asked to vote on a proposal filed by SHARE on behalf of its client HLB Investments.
The proposal is asking the company’s board of directors to commission an independent review of whether its lobbying activity, and that of its trade associations, is consistent with its own statements on health access & affordability, and to disclose the company’s plans to address any discrepancies.
Similar proposals have been filed at Eli Lilly and Gilead Sciences by our colleagues in the Investors for Opioid & Pharmaceutical Accountability (IOPA), where I serve as Co-Chair. Together in the IOPA we are engaging the biggest players in the pharmaceutical industry to address anti-competitive practices, board composition and governance practices, executive incentives, and policy activity.
Shareholders also have an interest in broad and timely access to medicines—affordable access is a cornerstone of a sustainable, inclusive and productive economy, upon which shareholder returns are dependent.
If that point wasn’t made abundantly clear prior to this pandemic, it is certainly clear now. As owners of assets across the whole economy, broad-based and accessible healthcare and pharmacare is in our best interest.
Companies must be accountable for the lobbying they conduct behind closed doors. Lobbying that undermines efforts to rein in drug prices is not in our best interests either as citizens or as shareholders, and has to be called out.
- For more information on SHARE’s resolution at Johnson & Johnson, please see our exempt solicitation on the Securities Exchange Commission website, available here: https://www.sec.gov/Archives/edgar/data/0001782324/000121465922004547/g331221px14a6g.htm
- For SHARE and the Maryknoll Sisters’ arguments in favour of the proposal at Gilead Sciences Inc., please see our exempt solicitation, available here: https://www.sec.gov/Archives/edgar/data/0001699865/000121465922004204/g322220px14a6g.htm
- For more information on Common Spirit Health’s resolution at Eli Lilly, please see its exempt solicitation, available here: https://www.sec.gov/Archives/edgar/data/0001699865/000121465922004204/g322220px14a6g.htm