‘Tis the season of annual shareholder meetings for the world’s largest drugmakers, marking a year that reaped billions in government-backed funding for those involved in the COVID-19 fight. But how will companies that were awarded taxpayer dollars ensure their products remain affordable and accessible post-pandemic?
It’s a question the Interfaith Center on Corporate Responsibility (ICCR) intends to pose to Johnson & Johnson and Pfizer through shareholder proposals at their annual gatherings, both scheduled for Thursday, and to Merck at its meeting in late May.
Submitted by members of the ICCR—a group of activist shareholders that represents over 300 faith communities and organizations—the shareholder proposals request the companies report to investors how they plan to develop access and pricing strategies for their COVID-19 products given that the public funded much of the R&D, manufacturing and distribution.
Pfizer and Johnson & Johnson urged the Securities and Exchange Commission (SEC) late last year to forestall the resolutions, Newsweek reported, arguing their “ordinary business operations” should be exempt from shareholder oversight. Except the ICCR held out, and the proposals are now set to go to a vote, according to proxies filed by Merck, Johnson & Johnson and Pfizer ahead of their meetings.
The ICCR previously pressed other top pharma players, including Eli Lilly, Gilead Sciences and Regeneron, for information on their drug pricing decisions. It withdrew the proposals after striking an agreement with the companies, Meg Jones-Monteiro, health equity director of the ICCR, told Fierce Pharma.
ICCR argues that the upcoming measures are aimed at preventing price gouging, which could damage the industry’s reputation as poorer countries struggle to get their vaccination programs off the ground. The plans are especially timely now that vaccine developers predict yearly booster shots will be needed to combat emerging variants of the virus, ICCR says. In Merck’s case, the troublesome variants mean the company’s therapeutics currently under development could become essential.
However, Pfizer, Johnson & Johnson and Merck are pushing back against the proposals and are urging shareholders to vote them down, according to their proxy statements.
The companies contend the measures aren’t necessary since the drugmakers pledged to provide their COVID-19 products at reduced or not-for-profit prices during the pandemic. Merck and Pfizer maintain that they haven’t received any direct funding from the federal government for the development of their medicines.
In its proxy statement, Johnson & Johnson said “additional disclosures this proposal requests would put the company at a significant competitive disadvantage” through the disclosure of “proprietary information.”
For Johnson & Johnson, the U.S. dolled out $ 456 million in federal funding for vaccine R&D and over $ 1 billion to expand manufacturing capacity last year. Meanwhile, the U.S. inked a supply deal with Pfizer for 200 million vaccines at $ 19.50 per dose, or $ 3.9 billion. Additionally, Pfizer’s vaccine partner BioNTech received nearly $ 500 million from the German government, ICCR points out. The group pointed to funding Merck received for its vaccine as well, although the company has since discontinued the shot’s development.
While it’s true that drugmakers have agreed to keep their prices low during the course of the pandemic, some of them, including Pfizer, have recently promoted plans to raise prices back to market value once the global disaster tapers off.
It’s unclear to shareholders when that time might come, and what will be the determining factor, said Cathy Rowan, director of socially responsible investments for Trinity Health, which submitted the ICCR’s proposal to Pfizer. Rowan added that the federal government didn’t require the pharma giants to share their intellectual property or manufacturing know-how with other countries in exchange for the funds, which could limit access abroad.
“Going forward, if we need a third shot or a booster, what is the pricing strategy there and who will pay for it? That’s all part of the access strategy,” Rowan said in an interview with Fierce Pharma, noting that Pfizer has previously developed similar plans for previous medicines.
Nicholas Lusiani of Oxfam America, a member of the ICCR who submitted a proposal to Johnson & Johnson, added that while the drugmaker promised to sell its vaccine on a not-for-profit basis, the company hasn’t disclosed how it defines “non-profit pricing.”
Although Johnson & Johnson argues that it’s annual Janssen U.S. transparency report “provides extensive disclosures on its responsible approach to pricing,” Lusiani said that the report was published prior to the pandemic and doesn’t address plans for the company’s vaccine specifically.
“There’s a big gap potentially between the cost of production, development, clinical trials on the one hand, and actual non-profit price,” Lusiani said in an interview. “And we don’t know what that discrepancy is, how big it is and how it’s explained.”