Gilead's ESG Awards Are Worthless. What About Drug Prices?
Diversifying your workforce represents a worthy goal. Yet, corporate social responsibility awards distract from what really matters to pharmaceutical company customers: whether or not they can afford life-saving medicines.
Corporate “Environmental and Social Governance” (ESG) performance ratings are less than worthless. Yet, companies cannot wait to show off when they make the cut.
Giddy communications shops rush out press releases boasting their inclusion on lists that purportedly showcase a commitment to ethical business practices. Many variables determine the gold star awardees that peacock for the public and shareholders. The common-sense metrics include how well a corporation treats its employees and customers. Others weigh how well companies reduce carbon emissions or strive for diversity in hiring practices.
While monitoring the carbon emissions of a natural gas company seems worthy, does it matter how much a pharmaceutical giant commits to climate change initiatives? What if the drug maker went all-in on diversity, but raised many of its drug prices 30 percent or more in under a year? In the end, who cares how much a drug company “greens” its production if sky-high price hikes make its products unaffordable to many Americans.
People living with HIV likely care more about sticker shock at the pharmacy counter than the diversity of Gilead’s sales force and research & development team.
Take Gilead Sciences as one example. In 2022, the California-headquartered drug maker cleaned up at the ESG awards ceremony. Gilead took home the Best Diversity, Equity & Inclusion (DE&I) Prize at Corporate Secretary and IR Magazine’s ESG Integration Awards. The company also earned the nod from the Association of Corporate Citizen Professionals as its first Corporate Social Impact Team of the Year designee. Fierce Pharma, a news outlet dedicated to reporting on the drug industry, ranked Gilead #2 on its Big Pharma list for corporate DEI efforts. Finally, JUST Capital and CNBC recognized Gilead as one of America’s most just companies, ranking it fifth overall in the pharmaceuticals and biotech industry. Paeans to DEI pay dividends.
Diversifying your workforce represents a worthy goal. Yet, corporate social responsibility awards distract from what really matters to pharmaceutical company customers: Can they afford their prescriptions, often in Gilead’s case, for life-saving HIV therapeutics?
The awards committees must have missed Gilead’s recent unsavory business practices. A 2023 New York Times story revealed how Gilead gamed the patent system, keeping Americans living with HIV on the less effective and not as safe Truvada to maximize profits before its patent expired. Gilead had already started researching the safer and more effective design of tenofovir (tenofovir alafenamide), but shelved it in favor of monopolistic profits for the older version. Then, just before the patent expired, Gilead brought the successor drug Descovy to market.
The shenanigans with Descovy don’t stop with mere patent profiteering. In under two years, Gilead doubled the price of its HIV-prevention drug. In the third quarter of 2020, Gilead charged healthcare safety net providers $445.11 for the PrEP medication; by the second quarter of 2022, the price hit $987.55. Pandemic-related inflation caused price hikes for innumerable goods and services, but inflation did not double pharmaceutical ingredient and manufacturing costs.
2022 marked a banner year in charity claw-backs from one of America’s supposed “most just” companies. According to its most recent financial report, Gilead generated over $27 billion in revenue, netting $4.59 billion in profit. Domestic sales of HIV medications accounted for $13.8 billion in sales. Despite beaucoup revenues with healthy profits for the year, Gilead made drastic changes to its Advancing Access Medication Assistance Program, a vital patient assistance program. Gilead reduced reimbursements to nonprofit healthcare providers that rely on the program for their low-income, uninsured patients living with HIV.
What if the drug maker went all-in on diversity, but raised many of its drug prices 30 percent or more in under a year?
The drug maker announced the changes would “support the long-term sustainability” of the initiative—code for trimming expenditures so the company generates greater profits. Just as troubling, the Gilead Foundation—the drug maker’s philanthropic arm—made substantial cuts to its charitable giving from the prior year. In 2021, Gilead donated equity securities to the foundation totaling $212 million. The following year, the drug maker slashed such donations by 59 percent, providing only $85 million in funds. The drop-off came despite no change in revenues.
ESG awards for corporate culture and commitment to diversity disregard the real ethical concerns in the pharmaceutical industry. People living with HIV likely care more about sticker shock at the pharmacy counter than the diversity of Gilead’s sales force and research & development team. The following metrics for drug companies make much more sense: Monitor patent manipulation that emphasizes profits at the expense of health outcomes; evaluate whether the company made it harder to access patient assistance programs; and, above all, highlight the affordability of prescription drugs. Have prices increased beyond inflation and costs from the previous year?
When an ESG award for the pharmaceutical industry focuses on these standards, then the recipient drug maker will actually have something to brag about.
