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August 10, 2012
Investors Take on Corporate Payments to Pharmaceutical Trade Association
    by Robert Kropp

Four major pharmaceutical companies may be undermining their profitability by membership in and payments to an industry trade association that contributed to candidates opposed to birth control.

Over the past two years, sustainable investors have expanded their shareowner activism around the issue of corporate political spending to include payments to trade associations such as the US Chamber of Commerce and the National Association of Manufacturers. Using for the most part a model resolution developed by the Center for Political Accountability (CPA), shareowners filing resolutions requesting that corporations report on such expenditures have attracted widespread mainstream support.

Following an expose published by Bloomberg in late May, a coalition of investors with a total of approximately $155 billion in assets under management are focusing their attention on four pharmaceutical companies that are members of the Pharmaceutical Research and Manufacturers of America (PhRMA).

During the 2010 elections, Bloomberg reported, PhRMA contributed $4.8 million to two non-profits that helped elect 23 legislators, all of whom subsequently voted to limit access to birth control by reducing federal funding for it.

The four pharmaceutical companies—Bayer, Johnson & Johnson, Merck, and Pfizer—manufacture birth control products, for which they amassed profits of $1.7 billion, according to Bloomberg.

In the letter to Merck, the investor coalition—which includes Trillium Asset Management, the New York State Common Retirement Fund, Domini Social Investments, Zevin Asset Management, the Nathan Cummings Foundation, The Sustainability Group, First Affirmative Financial Network, The Christopher Reynolds Foundation, and Newground Social Investment—stated, "We have consistently raised concerns when trade associations take actions that are contrary to their members' interests."

Describing the payments by Merck—which totaled $7 million in 2010—and the other companies as "perhaps the clearest case of a trade association using its members' payments against those same members' best interests," the coalition continued, "Merck is financing candidates that are actively working against its shareholders' interests."

Or, as Shelley Alpern of Trillium told Bloomberg, "At best case, it's a matter of the left hand not knowing what the right hand is doing."

The investors requested that the pharmaceutical companies ensure that their boards of directors "assess the benefits and risks of…political spending, including its indirect spending through trade associations." They also requested that the companies inform them of their involvement in PhRMA's decisions regarding political spending, and whether they have placed restrictions on how the trade association uses their payments.


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