Religious groups investing in US pharmaceutical companies are set to challenge the firms over price increases at their shareholder meetings in late April and early May.
Religious orders, congregations, faith-based health organisations and hospitals will file resolutions at the annual shareholder meetings of Pfizer and Johnson & Johnson on April 28, Abbott Laboratories (April 29) and Bristol-Myers Squibb (May 3), declaring their dissatisfaction at each company's failure to make a "clear case offering fiscal and moral justification" for the "exorbitant" increases in the prices of their brand-name drugs in recent years.
Nor has each company given "sufficient assurances that the present patterns of increases that far exceed the Consumer Price Index [CPI] will not continue," say the groups, which are all members of advocacy group the Interfaith Center on Corporate Responsibility.
The shareholder resolutions filed with each drugmaker state that "the cost of brand-name drugs, some of them our Company's, have skyrocketed in this country in recent years." They quote the findings of:
- the Government Accountability Office (GAO) that between 2000-2008, 416 brand-name drugs had "extraordinary price increases," mostly ranging from 100% to 499%;
- pharmacy benefit manager Medco's 2010 Drug Trend Report which found that, which generic drug prices had increased 0.3% during the year, those of branded drugs had accelerated to "an all-time high of 9.2%," and specialty drugs were up 14.7%;
- the Centers for Medicare and Medicaid Services (CMS)’ Office of the Actuary, which projects that US prescription drug spending will grow 92.7% during 2008-2018, exceeding all major categories of national health expenditures and representing the fastest-growing component of Medicare; and
- seniors' advocacy group AARP’s report that the prices of branded prescription drugs most widely used by Medicare beneficiaries increased 9.7% in the 12 months ending March 2010, a much higher rate of rise than during any of the prior eight years (2002-2009), and that while inflation rose 0.3% during the period, the drugs’ price increases ranged from 5.3% to 9.3%.
The faith groups’ resolutions request each company's board of directors to "create and implement a policy of price restraint of branded pharmaceuticals, utilising a combination of approaches to keep drug prices at reasonable levels, such as an increase that would not exceed the previous year's CPI, and report to shareholders by September 2011 on changes in policies and pricing procedures for pharmaceutical products (withholding any competitive information, and at reasonable cost)."
Proxy statements issued by each of the drugmakers call on shareholders to vote against these resolutions, pointing to the high costs of R&D and individual company initiatives aimed at making their products more accessible and affordable.
Bristol-Myers Squibb (BM-S) says it "firmly believes that prescription drugs are so important that everyone should have access to them. We believe the best approach to ensure broad access to affordable medicines for the uninsured and underinsured is through expanded coverage, not price restraints." Its board also "strongly believes that we shouldn't be compelled to adopt any formal policy regarding pricing increases. In this fast-paced and highly-competitive industry, we need the flexibility to price our products appropriately so that we may invest aggressively in the R&D of promising new and innovative medicines."
Pfizer's proxy statement points to the "long, high-risk and expensive enterprise" of pharmaceutical innovation, and says it is “essential,” during the period of market exclusivity, "that innovators are able to price drugs based on the value they bring to patients. It is also essential that they are able to freely charge those prices to reflect new medical information, changes in cost and emerging competition from therapeutic alternatives."
Abbott tells its shareholders that the report proposed by the price restraint resolution is "unnecessary," and warns that adopting such a policy "would undermine prudent business practices and eliminate the flexibility necessary to respond to changing market dynamics, product dynamics and geographies."
And Johnson & Johnson (J&J) says that the weighted-average compound annual growth rate of net price increases across the full range of its health care products "has been below CPI for many years."
"We do not disagree with the concept of maintaining pharmaceutical prices at reasonable levels," it says, but adds: "because we must balance patient access and competitive dynamics with our need as a company to have the resources necessary to keep innovating new and better medicines, and at the same time ensuring a fair return to our shareholders, the Board believes this proposal is not in the best interest of the company or its shareholders."