SEC Denies Efforts by Gilead Sciences and Vertex Pharmaceuticals to Block Shareholder Resolutions on Pharmaceutical Pricing Transparency

Strategic Insights -

The U.S. Securities and Exchange Commission (SEC) has denied efforts by Gilead Sciences and Vertex Pharmaceuticals to block shareholder resolutions asking for greater transparency around the management and mitigation of business risks from rapidly increasing U.S. drug prices. The shareholder resolutions, filed by the UAW Retiree Medical Benefits Trust, will appear on the companies' 2015 annual meeting ballots later this year. The SEC's decision acknowledges the significance of prescription drug pricing as a policy issue impacting the U.S. economy.

Key Takeaways:

  • The SEC denied efforts by Gilead Sciences and Vertex Pharmaceuticals to block shareholder resolutions on pharmaceutical pricing transparency.
  • The UAW Retiree Medical Benefits Trust filed the shareholder resolutions, which will appear on the companies' 2015 annual meeting ballots later this year.
  • The resolutions ask for greater transparency around the management and mitigation of business risks from rapidly increasing U.S. drug prices.
  • Companies are not currently required to disclose the risks from product pricing strategies, and most do not.
  • The Trust's proposals ask Gilead and Vertex to disclose the risks as they relate to other competitor products, patient access, research and development, and the degree to which development costs were borne by taxpayers funding government and academic research.
  • Meredith Miller, chief corporate governance officer of the Trust, commended the SEC for giving investors a seat at the table on an issue with considerable implications for the long-term financial sustainability of the companies and the capital markets.
  • Gilead has generated public attention and backlash with the introduction of Hepatitis C drugs Sovaldi and Harvoni, priced at $84,000 and $94,500, respectively, for a twelve-week supply.
  • Vertex's $300,000-per-year cystic fibrosis drug Kalydeco has been criticized by doctors due to its unsustainable pricing and potential financial gain for the company.

Statistics:

  • The UAW Retiree Medical Benefits Trust has $60 billion in assets and provides health care benefits to nearly 750,000 UAW eligible retirees and dependents.
  • Gilead Sciences' Hepatitis C drugs Sovaldi and Harvoni are priced at $84,000 and $94,500, respectively, for a twelve-week supply.
  • Vertex Pharmaceuticals' $300,000-per-year cystic fibrosis drug Kalydeco has been criticized due to its unsustainable pricing.

Sources:

  • UAW Retiree Medical Benefits Trust
  • UAW Retiree Medical Benefits Trust
  • SEC Response (Gilead, dated February 23)
  • SEC Response (Vertex, dated February 25)