A pair of religious organizations that own stock in Vertex Pharmaceuticals Inc. are pressuring the company to disclose more information about its lobbying efforts, the latest bid by such groups to force the pharmaceutical industry to alter its business practices.
In a shareholder proposal, the groups want the Boston-based biotech to report lobbying procedures and payments; membership in any organization that writes or endorses legislation, such as industry trade groups; and management policies for overseeing lobbying.
“Vertex is not particularly transparent,” said Jeff Perkins, executive director of Friends Fiduciary, an organization that manages funds on behalf of Quaker churches and schools, which submitted the proposal along with the Benedictine Sisters of Mount St. Scholastica, a Catholic monastery in Kansas.
“Our primary concern, as long-term investors, is that lobbying expenditures can be substantial and material. We like to know there’s proper oversight within a company. But there’s a fair amount of work they could do to improve disclosure.”
The proposal notes that Vertex spent $2.52 million in 2014 and 2015 on federal lobbying, citing data from OpenSecrets, and deployed 101 lobbyists in 28 states in 2015, according to FollowTheMoney. At the same time, Perkins pointed out that Vertex received a very low ranking on the latest index of Corporate Political Disclosure and Accountability of S&P 500 companies.
“Unfortunately, we were unable to talk with Vertex [prior to submitting the proposal],” Perkins said. “We always start our process by reaching out to engage in dialogue with a company. Vertex was persistently unresponsive.”
This is hardly the first time that such organizations have attempted to pressure drug makers to make changes. Earlier this year, the Interfaith Center on Corporate Responsibility unsuccessfully attempted to place proposals before shareholders of 10 drug makers over price hikes. However, the companies cited a Securities and Exchange Commission rule that allowed them to omit the proposals. Friends Fiduciary is an ICCR member.
Although the Vertex shareholder proposal does not cite greater disclosure concerning drug pricing, specifically, it does mention that the company supported an effort to defeat a California bill last year that would have required drug makers to explain price increases.
In its proxy statement, the Vertex board recommended shareholders reject the proposal. The board argued that lobbying is “not the primary focus” of the associations and coalitions in which the company is a member, and does not direct how funds are used. The board also dismissed the call for added disclosure.
“Our board acknowledges the interests of shareholders in information about our participation in the political process. However, our board believes that the proposal’s additional detailed reporting obligation would be duplicative of existing disclosures and that it would impose an unnecessary administrative burden and expense on the company when sufficient disclosure already exists.”
Perkins added that, in the past, Friends Fiduciary has submitted transparency proposals to other drug makers, but the Vertex proposal is the only one directed at a drug maker during the current proxy season.Ed Silverman can be reached at firstname.lastname@example.org. Follow Ed on Twitter @Pharmalot.