2017-03-16 / Business

Amgen dodges drug pricing inquiry

By Rob McCarthy
Special to The Acorn

A shareholder group has been turned away in its attempt to force Amgen to reveal how it sets the prices of its top-selling prescription drugs.

The shareholder group, Mercy Investment Services, told Amgen in a letter that its members are worried about consumer outrage over high pharmaceutical prices and by comments made by President Trump that drug makers are “getting away with murder.”

Mercy had asked Amgen for a list of price increases for its 10 top-selling prescription drugs between 2010 and 2016 and for the rationale behind the hikes.

Amgen attorney Andrea Robinson argued that drug pricing criteria fall under “ordinary business operations,” which needn’t be disclosed to shareholders.

In a Feb. 10 ruling, the U.S. Securities and Exchange Commission sided with the Thousand Oaks-based biotech giant and ruled that its drug pricing strategy does not need to be disclosed.

“We will not recommend enforcement action to the Commission if Amgen omits (drug price information) from its proxy materials,” an SEC staff attorney told Amgen in a report obtained by The Acorn. Mercy Investment includes mostly religious-based holdings such as St. John’s Regional Medical Center in Oxnard and Dignity Health, which operates St. John’s Pleasant Valley Hospital in Camarillo.

“Drug pricing represents a moral issue for the religious community,” the attorney for the shareholders, Paul Neuhauser, said.

Neuhauser said that in the past year, CEOs of major drug companies have appeared before Congress and have been roundly criticized over the cost of their products—including the life-saving EpiPen device and its infamous 400 percent price hike.

But in a Jan. 10 letter to the SEC’s Division of Corporation Finance, Robinson reminded commission staff that the “ordinary business operations” exemption exists so that stockholders of a publicly owned company don’t micromanage how it conducts its business. That includes how it sets prices and prepares for public backlash, she wrote.

“The supporting statement further requests that the company provide ‘detailed justification for price increases.’ These mandates demonstrate that the proposal is seeking to probe deeply into matters of a complex nature upon which stockholders, as a group, are not in a position to make an informed judgment,” Robinson wrote. Multiple attempts to reach Amgen for comment on this story were unsuccessful.

According to Neuhauser, Mercy Investment group will not pursue the issue with Amgen ahead of this year’s shareholder meeting, but it’s likely they will take up the matter again next year.

Identically worded proposals for greater transparency in drug pricing were submitted to at least eight major U.S. drug makers in the past year, and SEC staff gave thumbs down to each shareholder request.

But Neuhauser said that in 2015, three shareholder groups with interests in pharmaceutical companies were granted pricing information by the SEC, despite objections by the companies that the information remain private.

Similar to the Amgen defense, the drug makers in each case argued that investors were trying to micromanage business operations.

“This is not too intricate a matter for shareholders to understand,” Neuhauser wrote in his argument to the SEC. “Note that it is the rate of increase that is being requested, not the actual prices charged.”

According to its 2016 statement, Amgen recorded $21.9 billion in sales, up 6 percent over the previous year. The increase was led by a 49 percent jump in the sales of Blincyto for leukemia patients. The company’s other big gainers for the year included Kyprolis for treatment of myeloma—up 35 percent—and bone-density-building Prolia, up 25 percent in annual sales. Enbrel, used to treat rheumatoid arthritis, is Amgen’s top revenue producer with nearly $6 billion in worldwide sales.

But two of the company’s most successful cancer related drugs, Epogen and Neupogen, are declining in sales due to market competition and the roll-out of generic alternatives, the drug maker said in its year-end earnings report. Epogen sales dropped 30 percent in 2016 and Neupogen sales tumbled 27 percent.

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