GLOBAL - Shareholder value in pharmaceuticals is under threat if companies do not confront the health crisis in developing nations. Some 11 leading institutional investors across Europe, representing about £600bn in assets, have issued a statement to major pharmaceutical companies on how they should respond to global crises, such as Aids/HIV. They warn the industry that failure to defend drug patents may result in damage to its reputation, as well as profitability - similar to the tobacco industry.
Investors, including ISIS Asset Management, the Universities Superannuation Scheme, Legal & General and Schroder in the UK and PGGM, the second largest Dutch pension fund by assets, have signed the statement which has been sent to twenty companies. These include heavyweights such as Roche, Pfizer, Merck & Co and GSK (GlaxoSmithKline).
Investors are concerned that the long-term value of their pharmaceutical holdings could be affected should companies not respond to the crisis.
ISIS senior governance and SRI analyst, Olivia Lankester, said that while the bulk of responsibility lay with governments to provide funding, blame could easily be directed to pharmaceutical companies.
Several companies are already showing real leadership in facilitating access to their products and reporting on their activities to shareholders but we have yet to see a coherent and transparent approach across the industry.
She added: “Continuing high levels of criticism of the sector could have a negative impact on [its] reputation in the long-term. The main implication is around the sectors ability make the case for strong patent protection.
“The last thing we want is for a sectors that is dedicated to saving lives [to assume] the pariah status of the tobacco sector, for example.”
Lankester said that the next move was to wait on responses and then contact between eight to ten companies for discussions.
The drugs industry was attacked most notably in 2001 when British giant GSK became embroiled in a row over access to its life-saving Aids drugs in South Africa.
“It was around that time that we began to get particularly concerned about the issue,” added Lankester.
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