For the second time this year, a major pharmaceutical wholesaler has reached agreement with a coalition of institutional investors to bolster oversight of opioid distribution and board accountability.
In this instance, the Cardinal Health (CAH) board agreed to create a committee to monitor the risks of distributing the addictive painkillers and provide investors with reports of two investigations into allegations of failed oversight. In addition, the wholesaler agreed to post detailed information about its policies and efforts on its website.
As a result, the investor coalition, which also reached an agreement earlier this year with McKesson (MCK), withdrew a shareholder resolution that called for the Cardinal Health board to take these steps.
“Cardinal Health’s comprehensive response … provides an excellent model for the level of board oversight we believe is necessary to mitigate the high risks associated with these medicines,” said Donna Meyer of Mercy Investment Services, the asset manager for the Sisters of Mercy, in a statement.
Sisters of Mercy is part of the coalition that was led by the Interfaith Center on Corporate Responsibility, which has about 300 members that include faith-based communities, socially responsible asset managers, unions, and pension funds.
At issue is the extent to which the wholesalers exacerbated the opioid crisis.
The biggest distributors — a group that also includes AmerisourceBergen (ABC) — have been accused in countless lawsuits filed by city, county, and state governments of worsening the crisis by failing to properly oversee and monitor opioid distribution.
Cardinal Health, for instance, reached a $20 million deal with West Virginia early last year for failing to prevent the diversion of opioid painkillers and, in late 2016, struck a $44 million agreement with the Department of Justice for failing to report large amounts of suspicious orders.
Meanwhile, some coalition members are part of a related group called Investors for Opioid Accountability, which has pressured the wholesalers to ramp up oversight of opioid distribution and change executive compensation to reflect fines and legal costs associated with infractions.
In fact, some IOA members — notably, the International Brotherhood of Teamsters — are still pushing a shareholder resolution that would require the company to claw back executive compensation when there is misconduct stemming from opioid distribution.
Keenly aware of the negative publicity caused by the lawsuits and shareholder resolutions, the wholesalers are providing grants and donations to many communities to generate goodwill, an effort that one critic told Bloomberg News is “blood money.
As for AmerisourceBergen, it remains unclear whether any agreement can be reached. Meyer told us that “we haven’t seen any progress and they don’t seem to want to discuss it.” We asked the wholesaler for comment and will update you accordingly.
The ICCR coalition, by the way, has also sponsored shareholder resolutions seeking to compel drug makers to compile reports about the risks created by high prices and examine how pricing strategies propel executive compensation. The recent efforts failed, but did garner notable support among shareholders at Biogen (BIIB), AbbVie (ABBV), Amgen (AMGN), Bristol-Myers Squibb (BMY), and Eli Lilly (LLY).