When the U.S. government allocated more than $ 10 billion in contracts and prepayment commitments to pharmaceutical companies working on COVID-19 vaccines and treatments, public money recipients did not have to agree to offer their products at fair prices or share of intellectual property rights to enable faster production.
Now, two of the companies that got these contracts – Pfizer and Johnson & Johnson – are trying to prevent shareholders from voting on resolutions requiring the companies to disclose information about the impact of government funding on access to vaccines.
The US government has purchased 200 million doses of the Pfizer vaccine and 100 million doses of the Johnson & Johnson vaccines for approximately $ 20 and $ 10 per dose, respectively.
Shareholders’ resolutions, filed by members of the Interfaith Center on Corporate Responsibility (ICCR), a shareholder activism organization, ask these two companies to inform their shareholders about how to “receive public financial support for the development and manufacture of products for COVID-19, or will be taken into account in making decisions affecting access to such products, such as setting prices.
Similar resolutions were also filed with Eli Lilly, Gilead, Merck and Regeneron.
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Both Pfizer and Johnson & Johnson filed “no action filings” with the Securities and Exchange Commission (SEC) in December, asking the agency to rule that the companies can withhold shareholder proposals. Neither company responded The daily poster requests for comments.
“Have you considered government funding?”
In nearly identical documents prepared by the same attorney, both Pfizer and Johnson & Johnson argued that the proposals attempt to “micromanage” the companies by requesting a complicated detailed report. “
Meg Jones-Monteiro, ICCR’s Health Equity Director, called the micromanaging allegation “ludicrous.”
The claim that investors are trying to “micromanage” the companies stems from a SEC precedent finding that certain “ordinary business activities” should not be under shareholder scrutiny. But Jones-Monteiro argues that the issue of vaccine prices during pandemics does not fall into this category.
“Everything related to drug pricing has been identified as a social policy issue,” said Jones-Monteiro The daily posterwhich means that it is not just any company that does not need shareholder oversight.
She noted that the proposals do not ask about simple pricing decisions or complicated details about pricing algorithms. “We ask very generally: have you taken into account government funding? And how have you taken it into account?”
Oxfam, an ICCR member who submitted the proposed resolution to Johnson & Johnson, wrote in a supporting statement that “JNJ publicly stated that it will distribute a COVID-19 vaccine on a“ non-profit ”basis, adding: JNJ has not clarified what ‘non-profit’ means when the government finances a significant portion of research and development costs. “
“We suspect that the price of the vaccine is higher than the cost of production,” said Nicholas Lusiani, Oxfam’s senior advisor who works with the US pharmaceutical industry. The daily poster. “We would like to see actual production costs decrease.”
Johnson & Johnson subsidiary Janssen received $ 456 million for vaccine development in March and then $ 1 billion in August in exchange for providing 100 million doses to the federal government. The company expects to have the US doses ready by April.
Pfizer received a pre-payment commitment from the federal government of approximately $ 2 billion for 100 million doses in July, and signed an agreement to provide an additional 100 million doses in December for the same amount.
Trinity Health, which filed Pfizer’s resolution on behalf of the ICCR, wrote in a cover letter: “While advance payment commitments do not directly fund vaccine development, they reduce the risk associated with them.”
BioNTech, the company Pfizer partnered with to develop its COVID vaccine, also received funding from the German government.
Johnson & Johnson and Pfizer also argued in their no-action request that they have already “substantially implemented” the shareholder proposals by posting information about vaccine prices on their websites.
That information is not enough, Jones-Monteiro says. “What they are missing is the answer to the question we asked: how do you take government funding into account?” she said.
Intellectual property rights
While the government funded research and development of COVID vaccines and minimized the risks through advance purchase commitments, the vaccines also include fully publicly developed technologies, raising questions about intellectual property rights.
In November, Public Citizen released a report finding that the Pfizer and Johnson & Johnson vaccines were developed using a spike protein technology discovered by scientists at the National Institute of Health. “Years of government investment have fueled the rapid advancement of COVID-19 vaccine candidates,” the watchdog group wrote.
“Already, Janssen’s agreements with [U.S. health officials] have been criticized for restricting the government’s intellectual property rights, “Oxfam wrote in its Johnson & Johnson letter, saying that” could hinder mass production in line with global need – raise the price, increase the aggregate supply. and prevent universal access. “
SEBASTIEN BOZON / AFP / Getty
Rich countries that make up 16 percent of the world’s population currently have more than 60 percent of the world’s vaccine doses. Sharing or suspending intellectual property rights could increase production of the vaccine and make it easier for poorer countries to vaccinate their populations.
Under the current regime, countries whose populations have participated in vaccine studies are faced with a hugely inadequate vaccine supply. And the richest countries in the world have blocked a WTO proposal of India and South Africa to forgo vaccine patents to allow more widespread production of the vaccine.
“You need enough doses to create global herd immunity, and right now we don’t have enough doses and they are controlled by rich countries, which creates this situation of vaccine imperialism,” said Lusiani, the Oxfam adviser.
Lusiani said vaccine pricing issues pose potential risks to investors. “You can imagine the reputational risk of Johnson & Johnson receiving more than a billion dollars in government money and then increasing the price once the pandemic has reached astronomical levels,” he said, arguing that this could lead to investors withdrawing. from the company.
Then there are greater risks to the economy as a result of limited access to vaccines. “Investors want everyone to get the vaccine so that the economy can recover when people return to work,” he said. The White House Council of Economic Advisors estimates that speeding up vaccination is worth $ 10 billion every day to the economy.
Jones-Monteiro expects the SEC to make a decision this month on the no-action requests.