I will speak in favor of our shareholder proposal spotlighting Pfizer’s deal with the White House to support ObamaCare at the company’s annual meeting on Thursday, April 28 at the Renaissance Hotel in Dallas, Texas. The resolution itself asks for a report on Pfizer’s lobbying priorities. Our supporting statement in the Pfizer proxy reads, in part:
Pfizer played a key role in the passage of ObamaCare, even though a majority of Americans were opposed. CEO Jeffrey Kindler organized pharmaceutical CEOs in support of the bill, promoted a massive advertising campaign, and partnered with Left-wing groups normally hostile to Pfizer’s interests. For these actions, he received a multi-million dollar bonus.
According to media reports, Pfizer and other companies made an $80 billion deal with the Obama administration. In return for support of ObamaCare, the companies received (broken) promises of a guarantee of customers and insulation from certain kinds of competition. This kind of back-room dealing corrupts the political process, generates public outrage, and is inappropriate for an institution like Pfizer that pledges itself to responsible corporate citizenship.
Kindler even jointly authored an opinion article in support ObamaCare in the Washington Post with Andrew Stern, then-president of the Service Employees International Union. Stern abruptly resigned in spring 2010 amid reports that he was the subject of federal investigations into two unrelated, and possibly illegal, financial arrangements.
Kindler might argue that the deal is good for Pfizer, but he is shortsighted to ignore the history of government intervention in the marketplace. If ObamaCare fails to control health care costs, as several studies now suggest, the government will seek savings through price controls. Shareholders will ultimately lose. Perhaps Kindler plans to retire before Pfizer is required to sell its products for less than the cost of production.
This short-sightedness also hurt Pfizer’s relationship with Congress, with the House of Representatives now in Republican hands, and its standing with the American people.
The supporting statement was prescient because it was submitted before CEO Jeffrey Kindler unexpectedly resigned in December. As I pointed out at the time:
Kindler will have no trouble affording, and getting access to, quality health care for the rest of his life. The rest of us will not be so lucky. Unless ObamaCare is repealed, Kindler’s hit and run will keep middle-class Americans working well past retirement age in order to afford skyrocketing health care premiums.
It is not only ObamaCare critics that have targeted Pfizer CEO pay and benefits. According to an April 13 press release from the American Federation of State, County and Municipal Employees (AFSCME):
Pfizer’s retired CEO Jeffrey Kindler received nearly $25 million, a 60 percent increase over his 2009 compensation. During Kindler’s tenure, he received over $72 million in compensation during which time the stock price dropped by more than a third and Pfizer lost approximately $68 billion in market value.
AFSCME is sponsoring a “Say on Pay” proposal that will also be considered at Pfizer annual meeting.
Kindler was replaced by Ian Read, who unlike Kindler, spent most of his career with Pfizer before becoming CEO. Pfizer faces a number of challenges going forward, such as patent expirations on key drugs like Lipitor. It is about to learn the hard way that political deals are no substitute for competing in the marketplace. Read must steer Pfizer back to its traditional skepticism of government interference in its business. Read can start by repudiating the company’s support for ObamaCare.
The company’s statement urging a “no” vote on our resolution does not even address the political corruption issue we raise. The Pfizer statement reads, in part:
Ensuring good health for the people around the world is Pfizer’s enduring priority. Having a large portion of the U.S. population without health insurance or with inconsistent access to health care was not a sustainable situation. In 2009, there was a strong momentum to enact legislation that would increase coverage, and restrain the escalating costs of health care. For those reasons, much of the private health care sector, including the biopharmaceutical industry, agreed to work constructively to assist with the reform effort, and supported the Affordable Care Act legislation; Pfizer actively supported the parts of reform with which we agreed, and worked to improve those elements with which we disagreed.
We are supposed to believe that Pfizer’s sell out was motivated by its desire to ensure good health for people around the world? Moreover, the statement is misleading because it implies that Pfizer supported the good in the bill and opposed the bad, and that this was a defensible course of action because its passage was inevitable. The truth is that Pfizer supported final passage of bill, and its passage was certainly not preordained. In fact, ObamaCare was one of the most closely fought legislative battles in history. If Pfizer and the rest of Big Pharma had opposed the governemt-run health care, as they did in 1993, the result may have been different.
Polls show that ObamaCare is even more unpopular now than when it passed in March 2010. A substantial portion of Pfizer shareholders, employees and customers disagree with the company’s embrace of government run-and-rationed health care. Pfizer is the world’s largest drug company by sales. It is simply inappropriate for a company of Pfizer’s size and stature to be so closely aligned with one controversial political position.
ObamaCare will be a major issue in the 2012 elections, feeding into the more general issue of crony capitalism. The American people remain outraged that corrupt bankers and incompetent executives get bailed out, while ordinary people go broke. Jeffrey Kindler is lot like the other Jeffrey, of General Electric. Immelt aligned his company with the administration, reaped billions in taxpayer subsidies, and argued that it was in the best interests of his company, never mind that the inevitable result is the destruction of a free economy. How soon will Pfizer, like GE, face public wrath?