Pension fund urges GSK to act on AIDS
pharmafile | October 27, 2003 | News story | |Â Â Â
The world's largest pension fund has urged GlaxoSmithKline to step up its efforts to help combat the AIDS pandemic in the developing world.
The Californian Public Employees Retirement System (CalPERS) holds $760 million around 1% of GSK stock and is now demanding the company does more to address the crisis, claiming its current 'corporate behaviour' could damage its share price.
Writing to GSK Chief Executive Jean-Pierre Garnier, CalPERS said it recognised that the company had already established effective humanitarian aid programmes, but that more needed to be done.
CalPERS was itself responding to pressure from the lobby group, the AIDS Health Foundation (AHF), which had called for it to sell all of its shares in GSK.
CalPERS has instead suggested GSK urgently review its AIDS policy, in particular to look at increasing the use of 'voluntary licensing' agreements. This approach means the patent holder company can oversee production of generic copies of its drug by companies in the affected countries, enabling cheap versions of the drugs to be produced locally, and allowing the patent holder to maintain control of the product.
Industry fears that cheap generic versions intended for Africa would be re-exported and sold in high price western markets are one of the major reasons pharma companies have been reluctant to adopt differential pricing for the developing world.
GSK has already set up one voluntary licensing agreement with Aspen Pharmaceuticals to produce the anti-retroviral AZT in South Africa, but the deal has had been held back by the Government's lack of commitment to drug treatment to tackle the disease.
Pharmacia announced its own voluntary licensing agreement for its AIDS drug Rescriptor (delavirdine) with a Dutch non-profit drugs distributor in January.
The organisation will in turn contract generic manufacturing and distribution of the drug in the developing world. Under the pilot, manufacturers will be obliged to use different packaging for the product, thereby making it harder to re-sell in the US or Europe.
CalPERS has asked that GSK enlists the help of an independent expert on AIDS drug pricing in the developing world, setting a deadline of three months for the company to report back on progress made.
GSK said it "commended" the interest shown by CalPERS, and welcomed its rejection of AHF's request to sell its shares, but refused to respond to the specific demands.
Further defending its record, the company said it had been voted best in its class by Oxfam, while UN Secretary General Kofi Annan said GSK was "a company with soul".
Jean-Pierre Garnier recently addressed the related issue of research into new drugs for tropical diseases, which suffer from under-investment compared to diseases of the developed world.
"To truly restore public trust, we need to rebalance the focus of our companies", he told the BioVision life sciences conference in Lyon.
He said the pharmaceutical industry must find a "third way" to fund research in this area, citing as a good example the work done by GSK on a malaria vaccine with philanthropic funding from Microsoft Chairman Bill Gates.
Dr Garnier has been praised for his strong leadership of the industry on the issue, but is also known for his brusque turn of phrase.
"We need to continue to take good care of our shareholders and our colleagues, but we also need to show tangibly that we can deal with a problem which has nothing to do with us and apply our considerable resources to make that problem go away".
CalPERS concluded that GSK and the industry must continue to consider how it is perceived in order to protect its reputation and share price.
"We believe that many of the positive steps GSK has taken are recognised and appreciated. However, the emotional issues related to the pharmaceutical industry, and especially the AIDS epidemic, coupled with the sheer magnitude of the crisis will leave GSK vulnerable to criticism no matter how much support you provide", it said.
"This is a significant risk that you must address, and the more responsible perspectives you are able to benefit from, the better you will be able to manage the risk".
CalPERS' demands follows hot on the heels of a similarly unprecedented initiative from UK investors who formed an alliance to demand 'proactive action' from the industry.
The demands have come as top-level World Trade Organisation talks on drug patents remain deadlocked.
Most recently, the European Commission put forward a proposal to give developing countries 80% discounts on drug prices while introducing new measures to prevent parallel imports back into the developed markets.
But European industry representatives EFPIA and US lobby group PhRMA have both rejected the proposals as too rigid, with all sides now shifting their sights to the next WTO meeting in Cancun, Mexico in September.
