Big Pharmas, top biotechs balk at investor group's push for pricing transparency

A faith-based investor group’s attempt to learn more about drug pricing is hitting a wall as several corporations are moving to stiff-arm shareholder votes on the issue. This comes even as large drugmakers are putting out “transparency reports” of their own to share high-level pricing information.

The Interfaith Center on Corporate Responsibility is asking 18 pharma companies to detail price increases on their top-selling branded drugs and the reasoning behind them. The group has proposed resolutions for U.S. drugmakers to put to a shareholder vote and dispatched letters to those outside the U.S. to request the information.

But Donna Meyer, Mercy Investment Services’ director of shareholder advocacy, told FiercePharma that Merck & Co., Pfizer, Johnson & Johnson, Amgen, AbbVie, Biogen, Bristol-Myers Squibb, Eli Lilly, Gilead and Vertex each pushed back on the resolutions.

The U.S. companies largely resisted on two grounds, Meyer said. They said drug pricing is complex and that consumers wouldn’t understand it, and that disclosing the information would put them at a competitive disadvantage.

On pricing complexity, Meyer said, “They’re right.”

“Our retort to that is they should be part of the solution, rather than adding to the problem,” she continued. “It’s ridiculous that we have such a complex system for drug pricing” that the consumer cannot understand the product and value, she said.

The companies argued the resolutions deal with “ordinary business,” which means they can be excluded from a proxy vote, said Dignity Health VP of community health Susan Vickers.

ICCR also reached out to European companies including GlaxoSmithKline, Allergan and AstraZeneca. Meyer said pharma companies in Europe were more receptive to requests for transparency, but they ultimately made some of the same arguments against disclosing the information.

The industry’s pushback comes after Merck and Johnson & Johnson, two of the world’s biggest drugmakers, released “transparency reports” disclosing price hikes over their entire portfolios, rather than for individual drugs. Merck said it had raised list prices 9.6% on average last year, and realized a 5.5% increase after rebates and discounts to payers.

On Thursday, a Merck spokesperson said the company believes "disclosing our price increases at the portfolio level provides the information needed for people to understand our pricing practices, while protecting proprietary information on prices that have been negotiated with our customers."

"These negotiations drive our competitive marketplace—bringing prices down," she said.

Merck submitted a "no enforcement request" to the SEC to exclude ICCR's proposal in its proxy materials, which the regulator approved.

RELATED: Merck & Co. 'transparency report' shows average percentage price hikes have mostly been in single digits

For J&J, an average list price hike of 8.5% for 2016 resulted in an average net price gain of 3.5% after it doled out a total of $11 billion in rebates and discounts.

RELATED: Single-digit price-hike pledge? J&J has that covered already, company report says

Meyer said her group wants to see price increases for individual drugs, rather than averages.

Next, the group plans to attend annual shareholder meetings to express “disappointment that the companies didn’t let investors express themselves,” Meyer said. She added that the companies face hits to their reputations because of their pricing, as well as regulatory risks. Those can each lead to financial risks, she said, which directly affect investors.

“I don’t think it’s something we are going to give up on,” Meyer said.

As industry-watchers know, pharma companies have found themselves under intense pressure over the last year to explain and limit their price hikes. Politicians on both sides of the aisle have taken up the issue, and a majority of Americans say prescription drug prices are too high.

Kicking off a trend last year, Allergan CEO Brent Saunders pledged to limit hikes to under 10%, citing a “social contract” drugmakers have with society. Plus, Saunders later wrote, if pharma can’t police itself, politicians will come in with solutions of their own. Other companies, including Novo Nordisk and Takeda Pharmaceuticals, have taken the single-digit price-hike pledge.

RELATED: Allergan, true to its 'social contract' pledge, rolls out sub-10% price increases for 2017

The industry, for its part, is buckling in for a fight. Trade group PhRMA has raised its dues and recently unveiled a new “Go Boldly” campaign highlighting the strenuous efforts involved in bringing groundbreaking medicines to patients.

RELATED: PhRMA highlights hardworking scientists, cutting-edge meds in new reputation-saving effort