Shareholder proponents are reprising longstanding criticism about how pharmaceutical companies price their drugs and other products, focused largely as they were last year on Covid-19 treatments and fair access, but also on the perennial question of equitable access to drugs. In addition, another set of proposals seeks disclosure about public health issues, including most prominently reproductive health access for employees given current and impending U.S. restrictions on abortion, and tobacco. In all, just five of 24 proposals filed are resubmissions that went to votes last year.

Pharmaceuticals

Covid-19 treatments: Companies that developed and brought to market vaccines and treatments for the coronavirus face both old and new questions about fair access and how they price these products. There are three proposals:

• Pricing and government subsidies—Last year investors gave significant support for a proposal that asked for a report on government support for their research, at Johnson & Johnson (31.8 percent), Merck (33.6 percent) and Pfizer (28.3 percent). It has been refiled at all three, plus at Moderna for the first time, asking “whether and how [the company’s] receipt” of public funds “for development and manufacture” of either vaccines or therapeutics for COVID-19 “is being, or will be, taken into account when engaging in conduct that affects access to such products, such as setting prices.” It asks about the impact on pricing and (at Merck) “sharing intellectual property through voluntary licenses.”

TECHNOLOGY TRANSFER NEEDED TO END COVID-19 VACCINE INEQUITY

DIANA KEARNEY
Senior Legal and Shareholder Advocacy Advisor, Oxfam America

Oxfam and co-filers have filed shareholder proposals at Moderna and Pfizer asking the companies to study how they might transfer Covid-19 vaccine technology and know-how to manufacturers in low- and middle-income countries. The companies’ refusal to transfer mRNA technology is prolonging the Covid-19 pandemic. This not only preordains millions to unnecessary death and suffering, but also creates a massive drag on the global economy and poses significant risks to investors.

• Technology transfer—Oxfam America coordinated filing of an additional proposal at Moderna and Pfizer, asking each to

commission a third-party report to shareholders…analyzing the feasibility of promptly transferring intellectual property and technical knowledge (“know-how”) to facilitate the production of COVID-19 vaccine doses by additional qualified manufacturers located in low- and middle-income countries, as defined by the World Bank.

• Public health costs of vaccine restrictions—Harrington Investments and The Shareholder Commons have a new resolution at Johnson & Johnson and Pfizer that asks for a report on

(1) the public health costs created by the limited sharing of the Company’s COVID-19 vaccine technologies and any consequent reduced availability in poorer nations and (2) the manner in which such costs may affect the market returns available to its diversified shareholders.

Withdrawal and SEC action—Last year, the SEC rejected arguments that the pricing resolution was about ordinary business or moot, and it has done so again this year at Johnson & Johnson. Pfizer this year said the pricing proposal was moot because of its agreement with the UN for distribution of an oral antiviral drug and Trinity Health withdrew before any SEC response.

The SEC has rejected Moderna’s argument that the new technology transfer proposal is ordinary business and Johnson & Johnson’s assertion that the public health costs proposal duplicates the technology transfer resolution. The commission has yet to respond to Pfizer’s arguments seeking to exclude both the tech transfer and public health proposals.

“Anti-competitive practices”: Shareholder proponents have reflected widespread public concern about how much Americans pay for pharmaceutical products for many years. In 2022, they have a new resolution that argues five companies—AbbVie, Amgen, Gilead Sciences, Eli Lilly and Pfizer—are creating risks for themselves and investors because of monopolistic pricing and the use of “patent thickets” that keep drug prices high. The resolution seeks a report from each company

on how it oversees risks related to anticompetitive practices, including whether the full board or board committee has oversight responsibility, whether and how consideration of such risks is incorporated into board deliberations regarding strategy, and the board’s role in [the company’s] public policy activities related to such risks.

SEC action—AbbVie, Eli Lilly and Pfizer each argue at the SEC that the resolution is moot given their current discussion of risks. In addition, AbbVie and Pfizer both say it is ordinary business.

(Proposals that ask about congruency between drug companies’ policies on access to medicine and their public policy influence efforts are covered under Corporate Political Influence, p. 46.)

Risk and Impact Assessment

Reproductive health: Rhia Ventures is in the third year of its campaign to combat eroding access to abortion and other reproductive and maternal healthcare products and services. It wants Kroger, Lowe’s, TJX and Walmart to report by the end of the year

detailing any known and any potential risks and costs to the company caused by enacted or proposed state policies severely restricting reproductive rights, and detailing any strategies beyond litigation and legal compliance that the company may deploy to minimize or mitigate these risks.

The proposal points to the wide array of legal challenges that affect employees’ access to abortion and contraception, and the “patchwork” of relevant state laws. It reasons investors need to know how companies are responding given their stated support for diversity and inclusion.

SEC action—Lowe’s and Walmart both are arguing at the SEC that the resolution concerns ordinary business, which was successful for Walmart last year.

(See the Corporate Political Influence section, p. 45, for related proposals about questioning the consistency of corporate policies supporting women and public policy influence efforts.)

Public health: A handful of resolutions look at how food and consumer products affect public health. Harrington Investments previously raised concerns about how sugary drinks affect public health, but its resumitted proposals last year did not earn enough to be resubmitted. This year, Newground Social Investments and Myra Young have teamed up with The Shareholder Commons with a similar theme at CVS, Coca-Cola and PepsiCo (where a similar iteration earned 12.2 percent in 2021). They ask for reports on links between “public health costs” created by food, beverage and candy products and the companies’ “prioritization of financial returns” that may harm the long-term interests of diversified shareholders “who rely on a productive economy to support their investment portfolios.”

SEC action—CVS says at the SEC that the resolution is ordinary business, which persuaded the commission last year with regard to a a similar proposal from Young. In contrast, PepsiCo last year was unsuccessful in its ordinary business challenge to the proposal about “external public health costs” imposed by its food and beverage business. Coca-Cola this year says the proposal can be omitted because it is is similar to Harrington’s sugary drinks proposal last year that earned 9.3 percent, well shy of the 25 percent needed for resubmission. That proposal asked for “an assessment of risks to the company’s finances and reputation associated with changing scientific understanding of the role of sugar in disease causation.”

Sustainable food: The American Baptist Churches saw investors give 17.3 percent support to a proposal at Costco Wholesale this January that asked it to report

if, and how, Costco applies its Sustainability Commitment to its core food business to address the links between structural racism, nutrition insecurity, and health disparities. The report may include systems Costco has in place to address racial justice and food equity concerns through product development, marketing, and distribution.

Costco told investors in the proxy statement that it addresses food insecurity by support for Feeding America, a food aid charity, and by providing affordable prices and quality food. The proposals argued more information is needed and said a September 2021 report from Costco was too focused on philanthropy. Investors had to decide if they wanted more explicit information on nutrition and racism, and if and how Costco can address it.

Baby powder ban: The new U.K.-based proponent, Tulipshare, filed a resolution at Johnson & Johnson, asking it to end all sales of talc-based baby powder, “in recognition of the social justice and public health issues raised by multiple organizations and agencies.” The company has challenged the proposal at the SEC, arguing it concerns ordinary business since the company is being sued.

Tobacco: One of two tobacco proposals has already gone to a vote. The Sisters of St. Francis of Philadelphia earned 11.4 percent for a proposal that asked Walgreens Boots Alliance for a report “on the external public health costs created by the sale of tobacco products…and the manner in which such costs affect the vast majority of its shareholders who rely on overall market returns.”

Trinity Health is taking a more direct approach at Phillip Morris International, asking it to “initiate steps to phase out all production of PMI’s health-hazardous and addictive products by 2025.”