SEC to Gilead and Vertex: Let Shareholders Vote on Drug Pricing Risk Proposals

DETROIT, March 12, 2015 /PRNewswire/ -- The U.S. Securities and Exchange Commission (SEC) denied efforts by specialty drug manufacturers Gilead Sciences and Vertex Pharmaceuticals to block shareholders from voting on proposals asking for greater transparency around the management and mitigation of the business risks from rapidly increasing U.S. drug prices. As a result of the SEC's decision, the shareholder resolutions, filed by the UAW Retiree Medical Benefits Trust (the Trust), will appear on the companies' 2015 annual meeting ballots later this year.

"By rejecting the drug makers' requests and allowing investors to consider our proposals on their merits, the SEC – the watchdog of the U.S. capital markets – is recognizing that prescription drug pricing is a significant policy issue with a real impact on the U.S. economy," said Meredith Miller, chief corporate governance officer of the Trust. "We commend the SEC for giving investors a seat at the table on an issue that has considerable implications for the long-term financial sustainability of the companies in which the Trust and others invest as well as the capital markets in which we participate."

Gilead has generated the most 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 – due to both the large number of people diagnosed with the disease and the considerable impact purchasing the drugs for every Hepatitis C patient would have on federal, state, and local budgets. Doctors have publicly called the pricing of Vertex's $300,000-per-year cystic fibrosis drug Kalydeco unsustainable and a group of physicians and researchers involved in the development of the drug have criticized Vertex for potentially leveraging a serious medical condition for financial gain.

"Investors are concerned about the risks companies bring on themselves when pricing strategies backfire," said Miller. "When the products in question are life-saving prescription drugs, the results can be disastrous for institutional investors seeking sustainable value, purchasers limited by budget realities, and – most importantly – patients for whom needed therapies may be out-of-reach due to cost."

The Trust developed its proposal recognizing the need for more transparency around how the boards of pharmaceutical companies are evaluating the growing risks drug product pricing strategies pose to the business in the face of a vigorous national debate on the affordability of medicine. The rising costs of existing branded and generic therapies combined with the introduction of very expensive specialty drugs have increasingly burdened already-overstretched public and private payers' budgets.

The Trust's proposals ask Gilead and Vertex to disclose the risks from product pricing strategies 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. Companies currently are not required to disclose these risks, and most do not.

"As investors, we rely on the free exchange of information to make prudent capital allocation decisions," said Miller. "Right now, pricing information on the market for pharmaceuticals is not transparent to investors."

Copies of the SEC responses to the Trust's proposals are available at Gilead - SEC Response (dated February 23) and Vertex - SEC Response (dated February 25).

The UAW Retiree Medical Benefits Trust (the Trust) is the largest non-governmental payor of retiree health care benefits in the United States, providing health care benefits to nearly 750,000 UAW eligible retirees and dependents.  The Trust has $60 billion in assets.

SOURCE UAW Retiree Medical Benefits Trust