Religious Investors Target Pharmaceutical Companies' Practices

NEW YORK – Activists who are pressuring pharmaceutical companies to lower their prices have a potentially powerful ally: God.

An organization representing 275 religious orders and foundations is waging proxy battles in hopes of getting major pharmaceutical firms to make drugs available to people who can't afford them, and to give a detailed account of their actions to help the poor.

Members of the Interfaith Center on Corporate Responsibility began the quest three years ago with one resolution asking seven companies to restrain price increases. This year the group devised three additional resolutions dealing with limiting prices and expanding the public's access to drugs. Seven companies will have two different resolutions on their proxy statements.

A proxy statement is provided annually to shareholders so they can vote for companies' boards of directors and on resolutions by management and shareholders. Proxy statements are commonly used by socially conscious investors to increase awareness and change corporate policies they deem unjust and harmful. They were a factor in halting investment and business in South Africa during the apartheid era.

The Interfaith Center has been active for 30 years, fighting on a variety of corporate issues. It holds no stock but acts an adviser and coordinator for its members who hold about $100 billion in assets. The high cost of drugs combined with the large amount of underinsured or uninsured Americans compelled the center to target the drug companies.

"It is unacceptable that in such a rich country people can't afford to buy medicine," said Sister Regina Murphy, program director at the center. "The drug companies all say they have programs to help people get medicine but we are calling them on that. We want to see an accounting of those programs."

The center's success on the drug issue has been mixed. After several meetings with Pfizer Inc., the company agreed to keep its price increases under the rate of inflation and report increases to shareholders. No resolutions were filed on Pfizer's statement.

But the price restraint resolutions on the proxy statements of Abbott Laboratories and Eli Lilly & Co. didn't win enough votes to be resurrected this year. The resolution hasn't won affirmative votes from more than 10 percent of shareholders on any statement.

The Securities and Exchange Commission requires a resolution to win the approval of 3 percent of voters in the first year to be brought back, and 6 percent in the second, and 10 percent in the third.

Sister Murphy believes she'll win the necessary votes on this year's proposals. "I think as awareness of the issue grows we'll get more support" she said.

"Every day the papers have stories about some aspect of health care costs."

Mainstream investors aren't blind to the needs of the insured but social issues don't generally enter into a purchase decision.

"Sure a company's public image may be affected by these resolutions. But most investors are quantitative," said Carl Seiden, a pharmaceutical analyst at J.P. Morgan. "At the end of the day I don't think the resolutions carry much weight,"

The resolution for price restraint has gained momentum on the proxy statements at Merck & Co., Bristol-Myers Squibb, and Johnson & Johnson. The first time it was on the Pharmacia proxy, 10 percent of shareholders voted in favor of it. It will be filed with Bristol, Merck, Pharmacia and Schering-Plough this year.

The center is also filing a new resolution against Johnson & Johnson which asked the company to reduce prices on drugs for Americans' most common illness and report on its progress by September 2002. Sister Murphy said Johnson & Johnson seemed most amenable to the concept of price reductions.

This year a resolution was filed on Abbott and Lily's statements charging the companies to expand the public's access to drugs and to report on its endeavors by September 2002.

Lastly, a resolution was filed with the statements of the aforementioned companies to provide prevention and treatment for AIDS, tuberculosis and malaria in an affordable manner for people in Africa. A report should be filed to shareholders six months after the annual meeting,.

Representatives of three of the companies returned a reporter's calls seeking comment.

Schering spokesman Bill O'Donnell said the resolutions are taken seriously. Merck spokesman Greg Reaves said the company agreed with the center's ideals but that its requests don't factor into Merck's market dynamics. He added that problems such as the uninsured and AIDS in Africa were beyond the scope of any one company.

Pharmacia spokesman Paul Fitzhenry echoed those comments and added that it would be difficult to assess how many people benefited from efforts to provide medicines for the poor and uninsured. He would not comment on whether he thought it the demand for such information was reasonable.