Pharmaceutical companies, including Pfizer and Johnson & Johnson, are under pressure from governments and their own shareholders to ramp up access to COVID-19 vaccines as global distribution of the shots remains wildly unequal.
The U.S. reportedly bought enough doses to fully vaccinate over 700 million people, more than twice its population. Meanwhile, nearly a dozen countries in Africa and elsewhere are still waiting to get vaccines, and many more have only enough for a fraction of their citizens, according to the World Health Organization.
Shareholders submitted proposals at annual meetings this month asking U.S. companies to report on how any public investment in vaccine development might affect distribution and pricing decisions. Those requests come as the Biden administration last week backed a World Trade Organization proposal to waive intellectual rights for COVID-19 vaccines amid a surge of cases in India.
The pandemic has opened new inroads for activist shareholders focused on the environment, social justice and governance, as well as lawmakers concerned with rising drug prices and corporate practices they say complicate equitable access to medicines and vaccines. Congressional Democrats convened hearings last week on a bill that would allow Medicare to negotiate prices with drug companies to lower costs. Sen. Maggie Hassan raised the issue on Tuesday when U.S. COVID-19 response officials appeared for questioning.
“It’s going to be really critical that these vaccines remain accessible and that their price reflects the large investments that American taxpayers made in the research and development of the technology,” the New Hampshire Democrat said during a Health, Education, Labor and Pensions Committee hearing.
Hassan asked David Kessler, chief science officer for the White House’s coronavirus response team, what steps Congress can take to make sure drugmakers price vaccines and boosters in a way that accounts for taxpayer investment. Kessler said the next round of doses, if needed, will be provided free of cost for all Americans and he'll look to Congress for guidance on how to handle costs beyond 2022.
The Interfaith Center on Corporate Responsibility, a coalition of funds managing $2 trillion, says ESG investors, governments and the public must push the drug industry toward best practices for societal good as well as investment return.
“There has to be a convergence between investors saying, ‘This is why we think this is a risk and this is why we think companies need to do what we’re saying,’ and then, if that’s aligned, with where the direction of policy and legislation is going and if that’s also aligned with civil society,” Meg Jones-Monteiro, who leads shareholder engagement on health issues for ICCR, said in an interview. “Then we can move it along much faster.”
The proposals from ICCR members, which include religious organizations and other investors incorporating ESG, seek disclosure to get drug companies to consider any sort of public support for COVID-19 vaccine development and to prioritize lower prices and equitable distribution.
At New Brunswick, N.J.-based Johnson & Johnson, the proposal won backing from 32 percent of votes cast. The company received funding from the U.S. government to supplement what it spent developing a one-shot coronavirus vaccine. It’s distributing it using a “not-for-profit” pricing model for emergency use in the pandemic. J&J, which opposed the shareholder request, did not respond to a request for comment.
At New York-based Pfizer, the measure had 28 percent support. Pfizer said it didn’t take money from the government to develop its two-shot vaccine. The shareholder proposal argued that an advanced purchase deal with the U.S. provided a sure market for the company, decreased its risk and constituted public support.
Pfizer spokesperson Pamela Eisele referred to the company’s proxy statement, which asked shareholders to reject the proposal, and provided no further comment.
While falling short of a majority, the tallies are notable, particularly for a measure submitted for the first time. Average approval for shareholder proposals was 31 percent during the 2020 proxy season, according to law firm Gibson, Dunn & Crutcher LLP. For requests on social issues, the average was about 21 percent.
ICCR raised the issue in private talks with the other major U.S. company making coronavirus vaccines, Moderna. Shareholders whom ICCR works with didn’t own enough stock for long enough to submit a formal request at the company.
ICCR’s Jones-Monteiro said there’s a misconception that the government alone is responsible for access to medicines and vaccines. Vaccine makers could have decided to sell their COVID-19 shots only through multilateral arrangements, rather than deals with single wealthier countries such as the U.S., and could better prioritize creating products that can be distributed in low- and middle-income countries, she said. The super-cold storage needed for Pfizer and Moderna’s vaccines complicates delivery, and barriers to access can create legal and reputational risks, she said.
“From a business perspective, isn’t it better for a company to have broader market access as opposed to a very small market, when you think about return on investment?” Jones-Monteiro said.
From the pandemic’s early days, ICCR has urged companies to share information as they raced to create vaccines, warning that the industry’s viability could be at risk down the line depending on how they handle the crisis. The coalition said last week that its investor members celebrated support from President Joe Biden for the WTO waiver.
The Pharmaceutical Research and Manufacturers of America, a trade association for the industry, opposed the move. PhRMA President Stephen Ubl said in a statement that it will “undermine our global response to the pandemic and compromise safety,” touting exports of vaccines by U.S. companies and manufacturing partnerships.
Corporate governance consultant Douglas Chia, who founded Soundboard Governance LLC and served as J&J’s corporate secretary until 2016, said he generally believes companies should protect their intellectual property rights. On COVID-19 vaccines, he expects some could decide not to because of public pressure.
“This is an exception for big public policy and public health reasons,” Chia said in an interview. “You’re talking about a once-in-100-year event that impacts the entire world, and pharmaceutical companies do have some obligation to society to step up in those situations because they’re in the best position — they have the know-how and the resources to do that.”
Chia said the level of support for the Pfizer and J&J proposals is enough to elevate the issue as a discussion item for board members, in part because of the likelihood the requests would gain higher backing if resubmitted.
U.K. companies are also receiving calls to consider access. Amy Wilson, who conducts engagements on behalf of investor clients as part of investment manager Federated Hermes’ EOS division, addressed the issue with AstraZeneca, which is distributing its vaccine in Europe. Federated Hermes manages $625 billion in assets.
ESG-concerned investors want companies to consider their responsibility to different stakeholders and believe companies are facing regulatory, political and reputational risk if they fail to handle vaccine distribution responsibly, Wilson said. She said that while Federated Hermes generally expects companies to have a holistic approach to drug access, the pandemic’s urgency pushed the matter to the top of corporate and investor agendas.