GLOBAL - Moves by Danish pension funds and other investors were key in prompting pharmaceuticals firm Lundbeck to halt the use of one of its drugs in US executions, according to human rights group Reprieve.
Reprieve investigator Maya Foa told IPE: "Investor engagement with the issue was a crucial factor in driving Lundbeck to finally take action."
At the beginning of July, Danish company Lundbeck announced it had moved to alter the distribution of its medicine pentobarbital (trade name Nembutal) as a way of restricting its use as part of the lethal injection procedure in US executions.
In future, the drug will be supplied exclusively through a programme that will deny distribution to prisons in US states that carry out the death penalty by lethal injection, it said.
Previously, Lundbeck had said it did not control the distribution of the product, and that there were no viable steps it could take to prevent end-users getting hold of the drug product for unapproved use, short of withdrawing it from the market.
In May, Danish pension fund Unipension sold its entire holding in the pharmaceuticals stock Lundbeck, citing, among other factors, dissatisfaction with the way Lundbeck had handled the case of misuse of pentobarbital. The fund criticised the company's lack of openness with the public and investors.
Other pension funds in the country entered discussions with Lundbeck over the matter, including the DKK500bn (€67bn) fund ATP.
Reprieve's Foa said a number of investors who were unhappy with the situation had tried to engage with Lundbeck, but had "found the company's response to be wanting."
"The investors signalled their concern to the company itself, to certain ethical investment consultancy firms, and to Reprieve, who had been working on the case," she said, mentioning Unipension's decision to divest.
"There is a clear lesson here for any other companies that plan to step in to supply lethal injection drugs: shareholders will not stand for it, and negative media coverage will outweigh what little financial gains may be made."
Claus Berner Møller, portfolio manager at ATP, said: "I am pleased with this new initiative. If they have changed the distribution, and it does help to prevent the use of the drug in US executions, then it's great for Lundbeck.
"For us, it has been very important that Lundbeck started to have a better dialogue with us and with journalists, and also to be in line with their own mission."
Møller would not speculate on the degree to which ATP's engagement with Lundbeck had influenced the management decision to alter distribution conditions surrounding pentobarbital.
But he said that, on the whole, the pension fund favoured engagement as a means of promoting social responsibility at companies it invests in.
"Hopefully, it helps when you make an effort in discussions with companies," he said. "In general, it's better to engage with the companies. If they don't want to speak or discuss it with us, then of course we have to consider whether to sell our shares. But in the first instance, we would prefer to talk to them."
Lundbeck itself says that although Danish pension fund investors have sought clarification on the company's handling of the issue, investor meetings since the news broke earlier this year have shown very limited interest from foreign investors.
Magnus Jensen, investor relations officer at Lundbeck, said: "There has been almost no interest from investors abroad in this topic. The reason we made the decision has nothing to do with the way foreign investors have reacted.
"But of course we have had talks with ATP and other pension funds, and we take account of their views, along with those of other stakeholders."