Mallinckrodt Plc, a major manufacturer of generic opioids, is backing an investor’s request it disclose its lobbying spending and plans to issue a report, according to a shareholder coalition pressing drug companies to improve oversight in light of the opioid epidemic and confirmed by the company’s proxy statement released Wednesday.
The Staines-upon-Thames, England-based company told members of Investors for Opioid Accountability, who together manage $3.4 trillion in assets, it would recommend stockholders vote in favor of the group’s lobbying disclosure proposal, said co-leader Donna Meyer and Katie McCloskey, director of social responsibility for IOA member United Church Funds, lead filer of the request.
“The company is making an important step,” McCloskey said. “They’re willing to be on the record with it, and I think that’s something to be applauded for. We’re just going to monitor it and see how they do.”
A spokesman for Mallinckrodt didn’t return a call seeking comment.
In the proxy filing, the company explained its intentions.
“Mallinckrodt has significant efforts already under way to put together a ‘Political Engagement Report’ similar in significant respects to the report requested by the shareholder proposal. This report will disclose, among other things, our policies and procedures governing political contributions, the decision making process and oversight by management and the Board of Directors in respect of any political contributions Mallinckrodt makes, the amount of political contributions made by Mallinckrodt and the MNK Political Action Committee, and other related matters, such as certain disclosures with respect to our federal and state lobbying, trade association memberships and political engagements outside of the United States. We are committed to publicly issuing the first edition of this report later in 2019, which will address our activities for the fiscal year 2018. We intend to update this report on an annual basis going forward and expect that it will expand in scope over time,” the filing stated.
Telling shareholders to support a stockholder proposal is an action corporate leaders rarely take and that nearly guarantees the measure will win majority approval. If they intend to satisfy an investor request, companies more often strike a deal to avoid a vote.
Mallinckrodt makes generic opioid drugs, a business it’s planning to soon separate into its own public company and that was the subject of a federal investigation. The company agreed to a $35 million settlement in 2017 related to claims it violated federal law by failing to report suspicious opioid orders and misreporting the number of pills per batch at a facility, the Justice Department said in a statement.
The company’s lobbying has come under scrutiny as well. Mallinckrodt’s spending to lobby Congress surged in recent years as the business faced the federal investigation related to pain pill sales and a congressional inquiry into drug pricing. Competitors’ lobbying contributions similar climbed, The New York Times reported in 2017.
Mallinckrodt LLC spent $1.62 million lobbying Congress during the four quarters of 2018, according to federal lobbying filings. It reported no activity but spent $570,000 in the final quarter as the year wound down. Issues lobbyists worked on included opioid abuse and alternatives, Medicare and opioids and “DEA modernization,” according to filings for the first three quarters, which don’t detail spending by topic.
Mallinckrodt makes generic oxycodone, hydrocodone and combination acetaminophen and codeine pills, as well as morphine and fentanyl products. It also sells generic addiction treatments methadone and buprenorphine, as well as overdose-reversing naloxone. Its branded drugs include multiple sclerosis treatment H.P. Acthar Gel, which attracted criticism for its soaring price.
Mallinckrodt’s commitment is the latest success for IOA, which began a public campaign in 2017 to get drug companies to take greater accountability for the U.S. opioid crisis and improve internal oversight and controls to help assuage the epidemic and mitigate related business risk. Still, the company is opposing an IOA proposal for a report on board oversight of opioid sales and another related to policy for recouping executive pay, Meyer and McCloskey said.
Meyer said Mallinckrodt’s decision on the lobbying request takes some pressure off the company while it is still opposing two other IOA-backed proposals. The group still wants significantly more disclosure from Mallinckrodt, she said.
IOA’s novel shareholder proposal, which seeks opioid business oversight report, won majority backing including at Rite Aid Corp. and Walgreens Boots Alliance Inc., two of the largest U.S. pharmacy chains. The country’s three biggest drug distributors and several painkiller manufacturers, including Percocet maker Endo International Plc, agreed to release reports under IOA pressure.
IOA members also submit other, more traditional shareholder proposals — including for lobbying disclosure and policy changes related to recouping executive pay — that cite the opioid crisis. McCloskey said the proposal at Mallinckrodt asks for an annual report of direct and indirect lobbying policies and payments at the local, state and federal levels, membership in tax-exempt organizations that write or endorse legislation and descriptions of board and management oversight of this spending.
McCloskey expects Mallinckrodt’s support of lobbying disclosure will buoy the coalition’s efforts at other companies.
While Mallinckrodt reports spending on its federal lobbying efforts, the company can donate to trade associations and certain tax exempt groups that do not have to disclose their spending to influence lawmaking and government actions, which can include patient advocacy organizations. McCloskey said Mallinckrodt intends to release a report that excludes lobbying through these patient groups but will consider revealing those payments in future disclosure.
She emphasized the importance of companies tracking and understanding payments to these organizations.
“Either they’re acting in accordance with your stated public health goals or you don’t know what they’re lobbying on in which case you shouldn’t be giving money to them,” McCloskey said.
A Kaiser Health News database tracked $162.6 million in donations from 26 pharmaceutical companies to 650 patient advocacy groups. For example, KHN found $195,000 of drug company payments in 2015 to the American Chronic Pain Association, which was among groups that urged against “one-size-fits-all” dosage and prescription duration restrictions in a March letter to Health and Human Services Secretary Alex Azar. Mallinckrodt isn’t included in the database.
The company held its last meeting on May 16. No shareholder proposals were up for a vote. An IOA member withdrew a request on opioid business oversight after the company revealed its intention to “dispose of” its generics business, which includes most of its opioid products, according to a U.S. Securities and Exchange Commission document.
Mallinckrodt’s stock price climbed 52 percent in the past 12 months as the New York Stock Exchange Composite rose 2.7 percent. The company became publicly traded in 2013, and its stock hit its highest peak in 2015. Its share price steadily declined since. Net sales slipped 0.2 percent to $3.2 billion in the fiscal year that ended Dec. 28. Mallinckrodt lost $3.6 billion after making a $2.1 billion profit the previous fiscal year.
The company, which has its U.S. headquarters in St. Louis, is planning to spin off its specialty generics business by the end of the year. That unit includes most of its opioid painkillers.