With layoffs, walkouts, assaults against pharmacists, pressure from investor groups worried about fines from the DEA, some large pharmacy chains have been in the news recently and the headlines have been less than flattering.
Remember when your pharmacy was a locally owned and operated establishment. PBM and cost cutting have driven most, but not all, out of business. Here’s a link to find a friendly face once again.
Pharmacist themselves have been leaving the profession because of corporate cost cutting which has eliminated so many staff members, going to work means being on your feet from the time you walk in the door until your shift ends. No breaks, no lunch, having to document every dot and tilde of your steps in filling every script. It’s just too much.
As the opioid crisis intensifies, Walgreens Boots Alliance (WBA) is facing pressure from a group of stockholder activists to prepare a regular report on how it manages the risk of distributing these addictive prescription painkillers. And a pair of influential shareholder advisory firms is backing the proposal, which will be voted on Friday morning at the Walgreen annual meeting.
The proposal was filed by Investors for Opioid Accountability, a coalition of 53 state treasurers, pension funds, labor funds, and faith-based groups that collectively manage $3.4 trillion in assets. The coalition has targeted more than a dozen drug makers, wholesalers, and retailers in an attempt to change their business practices and account for the misuse and abuse of opioids plaguing the nation.
At the same time, a growing number of state, county, and city governments have filed lawsuits against many companies in a bid to recover the costs associated with overdoses, treatment, and ensuing crime. Such shareholder proposals, however, reflect a widening attempt to reach beyond management and speak directly to investors by appealing simultaneously to their pocketbooks and moral compasses.
In several instances, the coalition has succeeded in convincing boards to bolster oversight of opioid sales and distribution. Agreements have been reached with Allergan (AGN), Endo International (ENDP), Assertio Therapeutics (ASRT), Cardinal Health (CAH), and McKesson (MCK). And recently, AmerisourceBergen (ABC), in which Walgreen holds a 26 percent stake, agreed to provide a report by September.
Walgreens, however, has proven “intransigent,” according to Donna Meyer of Mercy Investment Services, the asset manager for the Sisters of Mercy. The coalition reached out to the retailer last summer and held two brief meetings last summer and fall with Walgreen executives, but the request for the board to regularly issue a report on managing opioid risks went nowhere, she told us.
Instead, the retailer filed a so-called No Action letter with the Securities and Exchange Commission, arguing why the proposed shareholder resolution was not appropriate. This is a standard maneuver when companies seek to exclude a shareholder proposal from a vote, although the company and the coalition subsequently engaged in three rounds of back-and-forth letters over the issue.
“Rather than sitting down and looking at what’s best for the company, they were resistant to taking responsibility,” Meyer told us. “And it was unusual, given that everyone recognizes the seriousness of the problem. We know that Walgreen can’t fix the problem by itself, but everyone needs to play their part in finding a solution.”
A Walgreens spokesman wrote us that the retailer, which has more than 9,500 pharmacies in the U.S., met with the coalition “on several occasions and will continue to meet with any group who wants to address this crisis.”
He also referred us to the Walgreens proxy statement for further explanation about objections to the shareholder resolution in which the retailer argues it annually publishes a corporate social responsibility report that includes information about identifying and responding to opioid-related risks. The chain also maintained a board committee that reviews risks and press releases are periodically issued.
In arguing its case, however, an attorney for Walgreens wrote to the SEC that the proposal was unwarranted for several reasons: The proposal refers to “ordinary business” matters, which is “not appropriate” for a shareholder vote, seeks to “micromanage” the company, and suggested the coalition sought to restrict Walgreen from selling opioids, which the shareholder resolution does not request (look here and scroll down).
Ultimately, the SEC disagreed. In a Nov. 20, letter, the agency wrote “we are unable to conclude that this particular proposal is not sufficiently significant to the company’s business operations such that exclusion would be appropriate. … We are also unable to conclude that the proposal micromanages the company to such a degree that exclusion of the proposal would be appropriate.”
Meanwhile, two influential shareholder advisory services are supporting the shareholder resolution.
In explaining it decision, Glass Lewis noted that in June 2013, Walgreens paid $80 million to settle civil claims for an “unprecedented number of record-keeping and dispensing violations” of the Controlled Substances Act. A Florida distribution center and six pharmacies allegedly allowed controlled substances, such as oxycodone and other prescription painkillers, to be diverted for abuse and illegal black market sales.
“Given the nature of its operations, we believe the company has been and may be further exposed to certain direct, legal, and reputational risks as a result of its involvement in the distribution of opioids and its political activity,” the firm report in a report to clients.
“We recognize that the company has taken certain actions in recent years in direct response to the opioid epidemic and that it briefly describes its risk management oversight as it pertains to opioids in its response to this proposal. However, we believe that the company could reasonably enhance its disclosure to provide shareholders with the information requested by this proposal.”
Similarly, Institutional Shareholder Services argued that “despite a continuing proliferation of lawsuits, subpoenas, and investigations related to the opioid epidemic, Walgreens does not seem to have taken steps at the board level related specifically to managing risks stemming from the opioid epidemic.
“… The potential regulatory, legal, and reputational risks associated with the ongoing controversy and scrutiny facing U.S. drugstores, including Walgreens, continues to mount. Accordingly, shareholders would benefit from more specific information about proactive steps the board is taking to ensure the company is complying with the law, effectively managing risks, and that incentives are aligned with the health of the communities it serves. As such, shareholder support for this proposal is warranted.”
The outcome of the vote, however, is highly uncertain, since Walgreens chief executive officer Stefano Pessina holds 15 percent of the stock. In any event, such proposals have been well received elsewhere. Last October, more than half of Rite Aid (RAD) shareholders voted to require the board of the pharmacy chain to report on opioids are monitored, and how the company is managing related financial and reputational risks.