Tension Rises Between Vertex (VRTX) and Its Religious Investors Over Lobbying Disclosures
4/19/2017 6:16:44 AM
April 19, 2017
By Alex Keown, BioSpace.com Breaking News Staff
BOSTON – The Board of Directors at Vertex Pharmaceuticals (VRTX) is opposed to a shareholder proposal to disclose additional information about its governmental lobbying and drug-pricing, according to a filing with the U.S. Securities and Exchange Commission.
The proposal, first reported about by the Boston Business Journal, is being presented by stockholders from two religious-based organizations, Friends Fiduciary Corporation, a fund manager that works with Quaker churches and schools and the Benedictine Sisters of Mount St. Scholastica, a Catholic monastery out of Kansas. The two groups own 400 and 92 shares of common stock respectively, according to the filing.
The two religious-based groups expressed concern that Vertex was not transparent enough when it comes to disclosing monies spent on lobbying, particularly at the state level. They are seeking additional reports available to shareholders showing exactly how the funds are being used in lobbying efforts.
Citing opensecrets.org, a lobbying transparency advocate, the shareholders said the company spent $2.52 million in 2014 and 2015 on federal lobbying, but did not provide full disclosure on funds spent to lobby state legislators–something the two groups want to remedy. The shareholders said Vertex retained 101 lobbyists in 28 states in 2015, citing another transparency website, followthemoney.org. But how money was used isn’t easy to determine due to existing requirements. The shareholders pointed to Vertex’ effort, among other pharmaceutical companies, to fight a California pricing initiative, the “Drug Price Relief Act Initiative,” which was ultimately defeated at the ballot box in November.
The shareholders go on to note that Vertex is a member of the trade group Biotechnology Innovation Organization, which spent $16.63 million on lobbying in 2014 and 2015.
“Vertex does not disclose its trade association memberships, nor payments and the portions used for lobbying. Transparent reporting would reveal whether company assets are being used for objectives contrary to Vertex’s long-term interests. We are concerned that Vertex’s lack of trade association lobbying disclosure, coupled with potential negative publicity for opposing drug price initiatives, presents reputational risks for Vertex,” the shareholders said in their supporting statement, as it shows in the SEC filing. “Transparent reporting would reveal whether company assets are being used for objectives contrary to Vertex’s long-term interests.”
In the filing with the SEC, the company’s board said it recommends voting against the shareholder proposal not because it wants to hide its lobbying activities, but because the board believes the additional reporting the shareholders are seeking would be “duplicative of existing disclosures and that it would impose an unnecessary administrative burden and expense on the company when sufficient disclosure already exists.” In its statement, the board said the associations and coalitions to which it belongs do have a lobbying function, but that is at the discretion of those organizations. The board said Vertex does not direct how its dues to those organizations are used. Additionally, the board said additional disclosures regarding payments to the trade associations “would not necessarily present an accurate reflection of our positions on certain public policy issues.”
Friends Fiduciary is also making a similar proposal with Pfizer (PFE), the Journal said.
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