Lawndale Tribune AND lAwNDAle News The Weekly Newspaper of Lawndale Herald Publications - Inglewood, Hawthorne, Lawndale, El Segundo, Torrance & Manhattan Beach Community Newspapers Since 1911 - Circulation 30,000 - Readership 60,000 (310) 322-1830 - March 16, 2017 Drug Maker Doesn’t Have to Explain Price Hikes to Shareholders By Rob McCarthy Call this a case of the right hand not knowing what the left hand is doing. A federal government lawyer told one of the country’s largest pharmaceutical companies last month it can remain silent about why it raised prices on life-saving therapies. The irony here is that the people asking for that information are concerned shareholders of the biotech company Amgen whose CEO was called recently to the White House for a meeting with the President. Amgen is based in Thousand Oaks, yet it is a darling with fund managers and South Bay investors because of the company’s sustained growth and annual profits that will return $11 or $12 per share to investors this year. The company earned $6 billion in profit last year, and made $16.6 billion in sales on its 10 topselling therapies. A faith-based shareholder group that includes the Catholic healthcare system Dignity Health filed a proposal last fall asking Amgen’s management to explain to the stockholders why it raised prices on some drugs dating back to 2010. Specifically, the Mercy Investment Services group asked for details about the company’s rates of price increases and the reasoning behind them. The request included any assessment of risks to Amgen from price hikes on its 10 best-selling drugs. An attorney for the group argued to the SEC that the healthcare debate in Washington and public opinion over patient-drug costs put Amgen and its investors on shakier ground in 2017. Stockholders could be affected if the federal government caps reimbursement for prescription drugs covered through Medicare and Medicaid, attorney and former law school professor Paul Neuhauser wrote to the SEC in January. That letter was a follow-up to another one sent last fall to Amgen CEO Robert Bradway and his management team. The Mercy Investment members were worried about public outrage over pharmaceutical prices and by comments made by President Trump during his campaign. Trump said that drug makers were “getting away with murder” and vowed the federal government would negotiate lower prices on his watch. The group is largely comprised of religious groups, including the Dignity Health system that operates clinics in Inglewood and Torrance. Their attorney reminded the SEC staff that in the past they had sided with shareholders wanting drug makers to explain to them how prices were set on FDA-approved medicines. Amgen, in its own letter to the SEC, said that it already provides drug information on its website. However, the faith-based group says the drug maker is being secretive and that the information it wants is more detailed than what the company has divulged publicly. Drug pricing represents a moral issue for the religious community, Neuhauser said, noting that CEOs of major drug companies have appeared before Congress and been roundly criticized over increases to drug costs, including a 400 percent hike for EpiPen, used by children with severe food allergies. Turing Pharmaceuticals caught flak from Congress and the public after it hiked the price by 5,000 percent on an anti-parasite therapy called pyrimethamine. President Trump in January met at the White House with pharmaceutical executives, including Amgen CEO Robert Bradway. One topic of discussion reportedly was the need to make drugs cheaper for U.S. patients. The President promised U.S. corporate tax cuts from his administration and gave the CEOs a tour of the White House, but he didn’t ask for any specific commitments from the pharmaceutical executives on capping their pricing. The interfaith shareholder group is keenly aware that the President, Congress, insurers and patients are closely watching how Amgen and the industry, known as Big Pharma, respond to the palpable dissatisfaction with high drug costs. Amgen’s business plan “can be upset if there’s enough public pressure,” Neuhauser said. The company’s revenues grew by eight percent annually over a five-year period, according to Amgen figures. Amgen attorney Andrea Robinson successfully argued that drug pricing falls into ordinary business operations, which needn’t be discussed with shareholders under SEC rules. In a letter dated January 10 to the SEC’s Division of Corporation Finance, Robinson reminded the commission staff that the exemption exists so that stockholders of a publicly owned company don’t micromanage how it conducts business. That includes how it sets prices and prepares for any backlash, she wrote. “The supporting statement further requests that the Company provide ‘detailed justification for price increases.’ These mandates demonstrate that the Proposal is seeking to probe deeply into matters of a complex nature upon which stockholders, as a group, are not in a position to make an informed judgment,” Robinson wrote. SEC staff issued its legal opinion in the Amgen matter on February 10 in favor of the drug maker. Though the opinion is non-binding, the Mercy Investments group will not pursue the issue with Amgen at this year’s shareholder meeting, the group’s attorney said. Identically worded proposals were submitted to at least eight U.S. drug makers, and SEC staff gave a thumbs down to each shareholder plan for more transparency about drug pricing. Mercy Investment members were involved in some, but not all, of the calls for more transparency from the pharmaceutical industry, Nehauser confirmed. It’s possible his client will pursue this issue next year with Amgen management, he said. Other drug makers being pushed by stockholders for more transparency about their pricing decisions include some of the largest pharmaceutical companies in the country. SEC staff in February blocked proposals filed with Biogen, Bristol-Myers, Eli Lilly, Gilead Sciences, Merck & Co., Pfizer and Vertex Pharmaceuticals, according to SEC records. The campaign by Inside This Issue Certified & Licensed Professionals.......................2 Classifieds............................3 Community Briefs...............4 Hawthorne Happenings....3 Legals................................ 6-7 Pets........................................8 Police Reports.....................2 Sports....................................5 Weekend Forecast Friday AM Clouds/ PM Sun 70˚/57˚ Saturday AM Clouds/ PM Sun 65˚/56˚ Sunday AM Clouds/ PM Sun 66˚/55˚ Centinela Hospital Unveils New Emergency Room A ribbon-cutting ceremony and community open house took place on March 8 to celebrate the newly expanded emergency room at nearby Centinela Hospital Medical Center (CHMC) as part of a $100 million campus-wide expansion and renovation effort. Pictured left to right, front row only, are CHMC executives Diane Freeman, Director of Emergency Services; Dr. Lee Weiss, Medical Director; Dr. Robert Chesne, Chief of Staff; Mohammad Naser, Chief Nursing Officer; and Linda Bradley, Chief Executive Officer. (Photo by Craig T. Mathew/Mathew Imaging) See Price Hikes, page 8
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