They've got a lot of nerve taking on pharma Goliath
Three government Davids got in the face of a corporate Goliath this week. It’s not clear yet what they’ll accomplish. For the moment, however, it seems almost insignificant what the treasurers of Pennsylvania and two other states did to provoke a corporate behemoth.
On Tuesday, state Treasurer Joe Torsella joined forces with his contemporaries in West Virginia and Illinois to send a letter to drug distributor McKesson Corp. Along with Illinois Treasurer Michael W. Frerichs and West Virginia Treasurer John D. Perdue, Torsella said the three states might dump their investments in McKesson stock if the San Francisco-based company doesn’t take steps to address its role in the spread of opioid abuse, now blamed for 33,000 overdose deaths a year nationwide.
Torsella, Perdue and Frerichs provided the media with copies of their letter, which states that McKesson should have spotted “clear warning signs” as they distributed more and bigger pills to the states. They cited a five-year period in West Virginia, from 2007 to 2012, during which distribution of 10-milligram OxyContin pills nearly doubled, while 15-mg pills tripled and shipments of 30-mg OxyContin tablets increased six-fold. The higher dosages are more dangerous, they contend — bigger doses are more likely to lead to addiction and overdose.
“The opioid epidemic is a national catastrophe that has already devastated millions of lives and families,” Torsella said in a news release accompanying the letter. “We expect those we invest in to be responsible partners in helping to end this crisis, not profit from it. It’s time to put Pennsylvanians before profits.”
The letter was sent in advance of the company’s annual shareholder meeting, which was Wednesday. The treasurers are asking McKesson to:
n change the company bylaws to provide for an independent board chair.;
n engage an independent counsel to identify the financial risks to which McKesson is exposed based upon its prescription opioid distribution and associated activities;
n connect executive compensation with progress in combating the opioid epidemic;
n produce a report for the Board related to the scope of the opioid epidemic, the impact of the problem on public health and government resources and possible responses to the problem.
But does McKesson Corp., the fifth-largest publicly held corporation in America, have any obligation to heed their warning? Valued at $30.5 billion, it ranks 188th on the Forbes Global 2000 list of the world’s largest corporations.
The Pennsylvania state treasury owns a reported 2,740 shares of McKesson, worth about $450,000 — around 0.000225 percent of the corporation.
Looking at it another way, $450,000 is roughly one week’s paycheck for McKesson CEO John H. Hammergren, whose annual salary is $20 million.
McKesson can’t possibly be swayed by the treasurers’ threats to disinvest their puny sum.
Or can it?
In January, McKesson announced that it agreed to pay $150 million in fines and suspend operations at distribution centers in four states to settle allegations of federal rules violations. The government accused McKesson of failing to design and use an effective system to detect and report “suspicious orders” from pharmacies for oxycodone and other powerful painkillers, as required by the Controlled Substances Act.
A penalty of that magnitude gets the attention of the biggest corporate Goliath — and the allegations are precisely what the state treasurers address in their letter to McKesson.
In essence, Torsella and his colleagues are adding their voices to the federal allegations to which the corporation has already admitted responsibility. But in another sense, they could the first of three states to stand up to worst kind of dope peddler — the white-collar kind. If 47 other states join in, maybe the Davids in this fight will have a chance.
