Religious Groups Urge Drug Makers To Ease Up On Price Hikes

Some religious groups are pressing major drug companies including Pfizer Inc. (PFE) and Johnson & Johnson (JNJ) to put the brakes on price increases, which last year were the steepest in a decade for top-selling drugs.

An order of Catholic nuns, a Catholic hospital chain and other members of the Interfaith Center on Corporate Responsibility want the boards of at least four large drug companies to adopt policies of "price restraint" on branded pharmaceuticals, such as limiting increases to the annual rate of inflation.

The groups have placed shareholder proposals urging such policies on the ballots of upcoming annual shareholder meetings for Pfizer, J&J, Bristol-Myers Squibb Co. (BMY) and Abbott Laboratories (ABT). The meetings are scheduled for late April and early May.

Barclays Capital recently said the average price increase for the top-selling 130 branded drugs for 2010 was 6.9%, the highest rate in a decade. Some newly approved drugs carry high price tags: $120,000 for a standard course of Bristol-Myers' skin-cancer treatment Yervoy, and $1,500 per injection of K-V Pharmaceutical Co.'s (KVA, KBA) premature birth drug Makena.

Drug companies have boosted prices to help offset hits to revenue from the recent U.S. health-care overhaul, and to maximize sales for top-selling drugs nearing generic competition triggered by patent expirations, including Pfizer's cholesterol-lowering drug Lipitor and the anti-clotting drug Plavix from Bristol and Sanofi-Aventis SA (SNY).

Supporters of the price-restraint proposals know they face an uphill battle. Companies oppose the measures, and other shareholders may view price restraints as a direct threat to profits.

But supporters want to send a message that price hikes are adding to the overall cost of healthcare, undermining the U.S. health-care overhaul's goals of expanding insurance coverage and controlling costs. Supporters say price increases hurt patients' ability to adhere to their prescriptions.

"More and more people can't afford this, and more and more fall back on taking either less pills or half a pill," said Sister Barbara Aires, coordinator of corporate responsibility in investments for the Sisters of Charity of Saint Elizabeth, a religious order based in Convent Station, N.J., which has around 390 sisters.

The Sisters of Charity's shareholder proposals say the companies haven't "made a clear case offering fiscal and moral justification for such exorbitant price increases." The proposals ask companies to limit price hikes to the previous year's Consumer Price Index, a gauge of inflation which last year came in at 1.5%.

The order is a member of the Interfaith Center on Corporate Responsibility, which says its mission is to urge companies to integrate societal values into their policies. The group's members span various faiths. Another member, Catholic hospital operator Trinity Health in Novi, Mich., is the lead sponsor of a price restraint proposal on Bristol-Myers' proxy ballot.

Restraint on prices may not be welcome by other drug-company shareholders, however. "As an investor, you'd want to vote against anything that limits the pricing power of your company," said William Smead, head of Smead Capital Management in Seattle, which owned shares of Pfizer, J&J, Abbott and Bristol as of Dec. 31.

Smead said drug companies should charge what the market can bear. But he also said most big companies have patient-assistance programs to provide drugs for free to eligible uninsured people, or to defray the costs of insurance copays.

Pfizer and other companies oppose price restraints because they say prices reflect the high cost and risks of drug research and development, in which more drug candidates fail than succeed. The companies instead favor expanding coverage as a solution to improving access to drugs.

"It is essential that innovators are able to price drugs based on the value they bring to patients," Pfizer said in its response to the price restraint proposal in its proxy statement. "It is also essential that they are able to freely change those prices to reflect new medical information, changes in cost, and emerging competition from therapeutic alternatives."

A Pfizer spokeswoman declined to comment beyond the proxy statement.

J&J said in its proxy it already strives to ensure that average price increases across the full range of its health-care products are within the consumer price index rate. J&J also makes medical devices and consumer-health products.

"We do not disagree with the concept of maintaining pharmaceutical prices at reasonable levels, and we will continue to price our pharmaceutical products in a reasonable and responsible manner," J&J said in its proxy statement. A spokeswoman declined further comment.

Bristol-Myers said in its proxy it needs flexibility on pricing so that it can invest aggressively in research. The company said it provided more than $458 million worth of medicines to more than 263,000 patients in 2010 at no cost.

"Abbott takes a responsible approach to pricing and offers numerous programs to ensure patients around the world have access to our innovative treatments," a spokeswoman said.

Abbott said in its proxy more than 160,000 patients received Abbott medicines valued at about $450 million in 2010 through programs to provide free or low-cost medicines to eligible patients.

-Peter Loftus, Dow Jones Newswires; 215-982-5581; peter.loftus@dowjones.com

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