Pension funds seek drug firms transparency
GLOBAL - European pension fund giants USS and ABP are calling on the pharmaceutical industry to address issues such as transparency and access to medicine in order to increase investor value.
According to two of Europe's largest pension funds, the pharmaceutical industry needs to review the balance between innovative drug research and the production of so-called 'me-too' medicines where existing products are copied with some improvement added.
Investors also want to see an increase in the drugs industry's investment and engagement in developing countries as well as more information on the early stages of drug research, the pension funds pointed out in a report.
"We need to improve two-way communication channels between the investors and the pharma industry," said Dan Summerfield, head of responsible investment at the UK Universities Superannuation Scheme, in a teleconference.
"This is vital in order to increase the level of and trust of understanding between the two constituencies."
At the same time, Martin Eijgenhuijsen, senior portfolio manager at the Dutch civil servants pension fund ABP, added: "In the last couple of years we reduced our weight in the big pharmaceuticals sector and shifted to other sub-sectors in the healthcare environment because we thought that the returns being made in big pharma are not that attractive in comparison to other sectors."
He continued the report and the dialogue started by it might serve as a catalyst to improve the investment possibilities and, alongside, the fund's exposure to the sector.
Summerfield said the USS will see how it can "engage with the companies invested in on some of these value drivers in terms of risks and opportunities".
Commenting on the stance of the two pension funds, Duncan Exley, campaigns manager at FairPensions, added: "It is good to see that some investors are moving in a generally good direction. It is more important that all investors should actively manage the significant long-term financial impacts of environmental and social issues in the pharmaceutical industry and elsewhere."
The charity had called on institutional investors earlier this year to use their powers as shareholders at Swiss pharma giant Novartis.
Together with the US pension fund Ohio Public Employees Retirement System (OPERS), USS and ABP founded "Pharma Futures" two years ago.
The initiative is aimed at creating a platform for dialogue between the pharma industry and investors. ABP, USS and OPERS have combined assets under management of over $474bn (€353bn) of which $20bn is invested in healthcare.
FairPensions has welcomed recognition of the need to invest "in a way that maximises value over the long term".
"There have been examples of pharmaceutical companies grabbing quick profits in a way that risks damaging their own long-term profits as well as the health of patients," Exley explained.
However, he is concerned that the "inappropriate parallel trade" mentioned in the report could include generic medicines which are "a vital healthcare issue".