A Gilead shareholder proposal, “Patient Access as a Criterion of Executive Compensation,” submitted by Gilead stockholder and AHF President Michael Weinstein, will be voted on during the 2014 Annual Meeting of Gilead Stockholders on May 7, 2014. Gilead fought repeatedly—and unsuccessfully—to block the resolution from appearing on its proxy, a move the S.E.C. soundly rejected in February.
Last week, Weinstein sent letters to every state pension fund as well as a few international funds asking them to vote in favor of the resolution, which would tie a portion of executive compensation at Gilead to the affordability and availability of its lifesaving medications.
Over the past two weeks, AIDS Healthcare Foundation (AHF) President and Gilead Sciences stockholder Michael Weinstein has sent letters to every state pension fund as well as a few international funds asking them to vote in favor of a Gilead shareholder resolution put forth by Weinstein which would tie a portion of executive compensation at Gilead to the affordability and availability of its lifesaving medications. Gilead has some of the most effective—and highly priced—HIV/AIDS medications available today and recently made international headlines by pricing Sovaldi (sofosbuvir), its new Hepatitis C drug, at $84,000 for a twelve-week course of treatment or $1,000 per pill.
Weinstein’s shareholder proposal, “Patient Access as a Criterion of Executive Compensation,” which was submitted to Gilead last year, will be voted on during the 2014 Annual Meeting of Gilead Stockholders being held May 7th. Gilead fought repeatedly—and unsuccessfully—to block the resolution from appearing on its proxy, a move that the Securities and Exchange Commission (SEC) soundly rejected in February.
Weinstein’s letter to the state pension fund managers notes that the shareholder resolution:
- “…requests that Gilead’s Board of Directors adopt a policy by which “incentive compensation for the Chief Executive Officer (CEO) should include non-financial measures based on patient access to the Company’s medicines.”
In addition, Weinstein letter (to Illinois, in the particular letter cited below), points out:
- Given Illinois’ sizable financial commitment to meeting the health care needs of its most
vulnerable citizens, including people living with HIV/AIDS, cancer, diabetes, and other
severe chronic conditions, the proposal makes good policy sense for the people of Illinois, particularly for public employees who rely on state-funded health benefits. In addition, as a matter of corporate governance, the proposal is in line with SRS’ (State Employees Retirement System of Illinois) dedication to making responsible investments. Therefore, AHF strongly urges SRS to vote in favor of the proposal.
- As a matter of policy, rising prescription drug prices have been, and continue to be, one
of the greatest drivers of health care costs in this country as well as an unnecessary
burden on the state’s budget. In 2013 alone, prescription drug price inflation was 13.9%
– nearly 7-times the rate of healthcare inflation (2.0%). At a time when CEO pay for
pharmaceutical manufacturers is rising rapidly, while the state is balancing its
budget in part by reducing reimbursements to Medicaid providers who serve patients in
need, policy change is needed. The proposal begins to address such change by
recommending to Gilead’s board of directors that CEO bonus compensation be reflective
of the extent to which patients are unable to obtain prescribed medications manufactured
by the company.
- Gilead Sciences has been at the forefront of an unfortunate trend that has seen drug prices
and pharmaceutical CEO pay rise rapidly even as more people with severe chronic
conditions face increased difficulty in paying for their care. For example, as noted in the
proposal, Gilead’s CEO, John Martin, is one of the ten highest paid chief executives in
the country, and will have total compensation of more than $180 million in 2014.1
- As a matter of governance, the proposal is in line with SRS’ dedication to pursuing
responsible and sustainable investments on behalf of its beneficiaries. The fund is a
signatory to the Principals of Responsible Investment (PRI), which states that
“environmental, social, and corporate governance issues can affect the performance of
investment portfolios.” 2The proposal reflects this principal, noting,“[t]he continued
escalation of Mr. Martin’s compensation, and that of other executives within the industry,
has diminished the public perception of Gilead” and may be a threat to shareholder value.
- Indeed, earlier this month members of the U.S. Congress requests a briefing from Mr.
Martin about the pricing of its Hepatitis C medication, Sovaldi at $1,000 per pill.
Congress was responding to widespread backlash over the pricing from private and
public coverage providers. Most notably, Express Scripts, CVS Caremark, Catamaran,
Aetna, and multiple state Medicaid agencies have all taken steps to block or delay the use
of Sovaldi because of its high cost. As a result of these actions, and the Congressional
inquiry, Gilead’s share price and market capitalization has dropped precipitously.3 This
situation underlines the importance of SRS’ involvement on these matters, both as a
steward of state finances, and in carrying out its fiduciary responsibilities to its
Gilead initially rejected Weinstein’s shareholder proposal outright without any prior consultation with Weinstein to resolve alleged discrepancies in his proposal—as required under SEC regulations. Weinstein then wrote asking the SEC to deny Gilead’s request for the exclusion of his proposal from its Proxy and allow shareholders the opportunity to vote on it during this year’s Annual Meeting, which prompted Gilead to petition the SEC to exclude the measure under two additional SEC rules. In a letter dated February 21, 2014, the SEC rejected ALL Gilead efforts to rebuff the proposal, telling Gilead they may not omit Weinstein’s proposal from its proxy. Here is a link to the SEC’s letter rejecting Gilead’s attempts to block the shareholder resolution.
“Investors large and small now have a chance to weigh in on tying a portion of Gilead’s executive compensation, such as bonuses or stock options, to patients’ access to the company’s drugs,” said Michael Weinstein. “I believe this resolution offers a new degree of accountability, recognizing the unique role pharmaceutical companies play both as businesses and in society.”