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The 2022 proxy season is set to be a demanding one for pharmaceutical and biotechnology companies, with investors calling on COVID-19 medicine manufacturers to ensure equitable access to treatments.
In 2021, the three shareholder proposals subject to a vote seeking vaccine equity and access reporting won 31.2% support on average, Insightia Voting data reveal. One year on, investors will be expecting companies to have made good on their commitments to bolster vaccine accessibility.
This proxy season, seven U.S. pharmaceutical companies will face a total of 15 shareholder proposals concerning medicine equity and access, coordinated by the Interfaith Center on Corporate Responsibility (ICCR).
Despite 13 attempts by issuers to exclude these proposals from their proxy statements, the Securities and Exchange Commission (SEC) has declined to prevent any proposal from going to a vote. Three further proposals have been withdrawn after agreements with shareholders.
The impact of COVID-19
Investors have long advocated for vaccine equity and accessibility. ICCR members first began engaging portfolio companies on vaccine distribution back in 2000 in response to HIV, tuberculosis, and malaria pandemics. Twenty years on, the issue gained international attention when the COVID-19 pandemic became an international crisis.
“COVID-19 has triggered a significant increase in interest from institutional investors in access to medicine,” Damiano de Felice, director of strategy at the Access to Medicine Foundation, told Insightia’s Voting module in an interview. “For these investors, it is now clear that global health presents systemic risks to their portfolios as well as business opportunities for their investee companies.”
According to research organization Our World in Data, 65.6% of the world’s population has received at least one dose of a COVID-19 vaccination, as of May 4, 2022. Despite this, only 15.8% of people in low-income countries have received at least one dose.
In the two years since the start of the pandemic, the reputational and legal risks companies face by limiting vaccine equity and accessibility have only increased.
The U.S. government awarded contracts that total more than $10 billion to biotechnology companies in its efforts to combat COVID-19. In a press statement, ICCR said that many pharmaceutical companies face allegations of “profiteering” from the pandemic, by accepting significant investments from governments but refusing to transfer their technology to third-party vaccine manufacturers in low-income countries.
Investors take action
Pharmaceutical companies that have dismissed investor calls for vaccine equity and accessibility reporting won’t be able to hide their heads in the sand for long as they are due to face an abundance of shareholder proposals on the topic at their upcoming 2022 annual meetings.
Proposals asking Johnson & Johnson (J&J) to disclose how its lobbying activities align with its public position on health equity and whether public financial support for vaccine development will be considered when setting prices for COVID-19 treatments won 43.3% and 33.8% support, respectively, at the S&P 500 drug manufacturer’s April 28 annual meeting, a modest increase from the 31.7% support a proposal regarding vaccine access won at the company’s 2021 annual meeting.
Proposals asking Pfizer to report on the feasibility of enabling third-party vaccine manufacturing and anticompetitive practices also won 27.4% and 30.4% support, impressive for proposals that faced opposition from management.
Many more proposals are set to follow, with AbbVie, Gilead Sciences, and Merck & Co. also facing similar requests regarding medicine equity and pricing.
Investors haven’t stopped at filing shareholder proposals. In January, a $3.5 trillion investor coalition called on COVID-19 vaccine manufacturers to link 2022 executive remuneration plans with vaccine equity and distribution targets.
Frank Wagemans, senior engagement specialist at Achmea Investment Management, told Insightia that this campaign aims to ensure board directors have “skin in the game” and make vaccine accessibility a much-needed priority.
The first few votes concerning vaccine equity this season have proven that healthcare remains a priority concern for investors, even more so than in previous years. As time passes, investors will only escalate their engagements against vaccine equity laggards.
Although BlackRock voted against all three shareholder proposals seeking COVID-19 vaccination reporting in 2021, the world’s largest fund manager made clear in a voting bulletin that it expects vaccine manufacturers to “update the market regularly as the situation evolves, and to provide assurance regarding continued access to the company’s products for those in need.”
Companies are acutely aware of the mounting pressure they face and are already taking action. On October 27, 2021, S&P 500 drug manufacturer Merck & Co. entered its COVID-19 drug into the Medicines Patent Pool (MPP), allowing for royalty-free patent-sharing with generic manufacturers. This was welcome news to investors, with Merck’s share price increasing from $81.54 to $86.55 the following day. Since then, Merck’s peers have faced increased pressure to follow in its footsteps.