Download this Paper Open PDF in Browser

The Price Isn't Right: Shareholder Proposals as Opportunities for Institutional Investors to Restore Firm Value and Reduce Pharmaceutical Prices

59 Pages Posted: 29 Sep 2017  

Carly Goeman

Columbia University - Columbia Business Law Review; Columbia University, Law School, Students

Date Written: August 24, 2017

Abstract

Surging pharmaceutical prices in the United States create financial strain for patients, insurance companies, and state and federal governments. Regulatory delays and coverage denials due to product prices can also affect shareholders of pharmaceutical companies by depressing stock prices. While a number of industry leaders have acknowledged that dramatic price hikes can damage their businesses, many pharmaceutical companies have not demonstrated a willingness to scale back prices.

This Note considers the use of shareholder proposals to address drug pricing policies at the company level. While shareholders of most companies are generally unable to address pricing policies, a carve-out created by the Securities and Exchange Commission allows shareholders of publicly traded pharmaceutical companies to do so. This Note studies how shareholders can use the carve-out to push for price restraint by either causing a company to include a price restraint proposal in its proxy materials and annual meeting or causing management to negotiate with proponent shareholders in order to convince the shareholders to withdraw their proposals. By evaluating the success of prior attempts to impact drug prices through shareholder proposals, this Note concludes that institutional investors are the linchpin of shareholder success, whether that success is through a vote at the annual meeting or a compromise at the negotiation table. This Note therefore calls on institutional investors to evaluate their portfolios and consider using shareholder proposals to unlock firm value and relieve the financial pressure created by rapidly rising drug prices.

Keywords: shareholder proposals, pharmaceutical, price restraint, specialty pharmaceuticals, SEC, proxy materials, corporate governance, institutional investors, stock price

JEL Classification: K22, K32

Suggested Citation

Goeman, Carly, The Price Isn't Right: Shareholder Proposals as Opportunities for Institutional Investors to Restore Firm Value and Reduce Pharmaceutical Prices (August 24, 2017). Columbia Business Law Review, Vol. 2017, No. 2, 2017. Available at SSRN: https://ssrn.com/abstract=3043528

Carly Goeman (Contact Author)

Columbia University - Columbia Business Law Review ( email )

New York, NY
United States

Columbia University, Law School, Students ( email )

435 West 116th Street
New York, NY 10025
United States

Paper statistics

Downloads
16
Abstract Views
66