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April 27, 2005
Pharma and Biotech Companies Just Starting to Pass the Transparency Litmus Test
    by William Baue

oekom research rates the social and environmental sustainability performance of 27 pharmaceutical and biotechnology companies, and finds disclosure lacking across the board.


Pharmaceutical and biotechnology companies: can't live with them, can't live without them. Both provide medicines and therapies vital to human wellbeing; however, both are also embroiled in controversy over how they dispense the significant influence and power afforded by this crucial role they play in society. Truth in marketing and clinical trial findings, access to medicines for the economically disadvantaged, and political contributions are just a few of the contentious issues facing these sectors.

In its latest Corporate Responsibility Rating (CCR) report, Munich-based sustainability rating firm oekom research assessed how 27 of the largest listed pharmaceutical and biotechnology companies in the world on social and environmental performance. As a whole, the sector received an average grade: C on a scale from A+ to D-. Standout companies included UK-based GlaxoSmithKline (ticker: GSK) with a B followed by Denmark-based Novozymes (NVZMF.PK) and Novo Nordisk (NVO) and US-based Johnson & Johnson (JNJ) and Bristol-Myers Squibb (BMY), which all earned a B. Bringing up the rear were three US-based companies: Gilead Sciences (GILD) and Genentech (DNA) with a D+ and Genzyme (GENZ) with a D.

Transparency is the turnkey, cutting across all the above issues, with disclosure generally disappointing the analyst team that performed the ratings--team leader Oliver Rüdel with Evelyn Bohle, Till Jung, and Dietrich Wild.

"It depends on the topic, but overall they are just starting to improve their transparency," Mr. Rüdel told SocialFunds.com.

Take, for example, the issue of transparency regarding what is referred to as "access to medicine" (ATM) for the poor, particularly in developing nations.

"Many companies say, 'we make pharmaceutical donations' but it's hard to get any clear information on the extent or who has responsibility for these donations," Mr. Rüdel said. "Sometimes it seems that they are just trying to get rid of old drugs by donating them to developing countries."

"This is one of the main criticisms of pharmaceutical companies, who say 'we bring health to the world,' but they don't comprehensively address diseases that occur in developing countries," he added.

While companies generally have ATM programs in place addressing developing nations, most lack not only transparency but also a clear strategy. One exception is sustainability rating leader GlaxoSmithKline, which has research and development projects to develop vaccines for diseases that disproportionately affect developing countries.

However, GlaxoSmithKline is also facing criticism for allegedly withholding from the public negative findings obtained in drug trials for its antidepressant Paxil, along with Merk (MRK) for its heart drug Vioxx.

"[S]everal companies state that their trials are conducted according to international standards such as Good Clinical Practices guidelines or the principles of the Declaration of Helsinki," the report states. "However, only very few companies reported on the registration of new trials in openly accessible databases at their inception."

Roche (ROG) has started a clinical trial registry in an openly-accessible database, and GlaxoSmithKline is following in its footsteps, a common phenomenon for those exposed to legal action to become first-movers.

On the issue of political donations transparency, Schering-Plough (SGP) and Johnson & Johnson recently followed in the footsteps Pfizer (PFE) by agreeing to comprehensive disclosure. Prompting this move was a shareholder resolution filed by members of the Interfaith Center of Corporate Responsibility (ICCR), a consortium of 275 faith-based institutional investors with approximately $110 billion in assets. ICCR thus withdrew the resolution at the two companies, but it has gone to vote over the past two weeks at four other pharma companies: Eli Lilly (LLY), Wyeth (WYE), Abbot Laboratories (ABT), and Merck (ICCR is still compiling results).

However, the positive move by Schering-Plough and Johnson & Johnson on this one issue is unlikely to sway oekom's assessment significantly.

"It will have only a small effect on the overall rating, even if it's an important topic at the moment and even if they are forerunners in the moment," said Mr. Rüdel.

Indeed, Johnson & Johnson's rating improved this year as compared to last, while Schering-Plough's deteriorated--best practice on social and environmental sustainability must cross multiple areas in order to buoy ratings upward.

 

 
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